The 2020-21 Australian Federal Budget was, unsurprisingly, focused on dealing with the financial and health implications of nearly a year battling the coronavirus pandemic. 2020 has seen widespread economic devastation, significant loss of both jobs and businesses around the country, as well as a budget deficit that even Treasurer Josh Frydenberg described as “eye-watering”.
But Australia is in a better position than many nations to endure COVID-19 and get back on the path to economic stability. Key to this strategy is a budget focused on job creation, consumer spending, tax cuts and additional support payments.
One of the biggest announcements from the Federal Budget 2020 on October 6 was the significant reforms of the country’s superannuation system. Titled Your Future, Your Super, the federal government program will start from 1 July 2021 and will include a range of new policies.
Federal Budget – Your Future, Your Super Policies
Employers must pay super contributions into a new employee’s existing super fund – this will help reduce the number of unintended multiple superannuation accounts.
The ATO is creating a new ‘YourSuper’ portal, which will allow individuals to choose their super accounts from a list of MySuper products. The portal will also include a comparison tool, with all MySuper products updated and ranked quarterly.
The Australian Prudential Regulation Authority (APRA) will have a greater say in which super funds new members can join. If a fund fails APRA’s benchmarking tests in two successive years they will be deemed underperforming. Individuals will not be able to join underperforming funds.
New laws around transparency and accountability will ensure super funds always have their members’ best interests at heart. Every fund’s actions will need to align with their members’ retirement savings being maximised, and they will need to provide information to members and evidence of any fund expenditure before the annual member meetings.
While these changes won’t take effect until the next financial year, there is reason to celebrate a more transparent and honest superannuation system. The Morrison Government’s budget announcement means fund members, pensioners and older Australians can have more trust that their retirement savings are being protected, and funds will be held more accountable to the best wishes of their members.
The annual performance test of superannuation funds is a welcomed reform by the Commonwealth to address underperformance and reduce unnecessary fees, particularly against the backdrop of Australia’s economic recovery from the pandemic and the financial situation of many Income earners, especially those that have been on Jobseeker.
To learn more about how these superannuation reforms impact your retirement income, speak to your financial adviser.