On Thursday, both the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 and the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 passed through the House of Representatives and the Senate.
The bring-forward measures will amend the Income Tax Assessment Act 1997 to enable individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.
Previously, members under age 65 at any time in a financial year may effectively bring forward up to two years’ worth of non-concessional cap for that income year, allowing them to contribute a greater amount up to $300,000 without exceeding their non-concessional cap.
This is known as the “bring-forward rule”. The number of years that may be brought forward into the current financial year is determined by the member’s total superannuation balance at 30 June 2019.
This bill would amend sub-section 292-85(3)(c) of the Income Tax Assessment Act 1997 to allow the bring-forward rule to be used by members under age 67 at any time in a financial year. This amendment would be effective from 1 July 2020 onwards.
This initiative is implemented through three changes where the age at which the work test starts to apply for voluntary concessional and non-concessional superannuation contributions is increased from 65 to 67, the cut-off age for spouse contributions is increased from 70 to 75 and enabling individuals aged 65 and 66 to make up to three years of non-concessional superannuation contributions under the bring-forward rule.
Upon passing the bill, the government had also agreed to two One Nation amendments.
Amendments made by Pauline Hanson’s One Nation party included the removal of excess concessional contributions charge from 1 July 2021 and no deductions for recontributions of amounts withdrawn under COVID-19 early release, where recontribution is made from 1 July 2021 to 30 June 2030.
The removal of excess concessional contributions charge removes the application of an excess concessional contribution charge that applies to any additional tax liabilities that arise due to a member exceeding their concessional contributions in a year, according to Colonial FirstTech.
Meanwhile the re-contribution of COVID 19 early release amounts, would allow a member that released amounts from superannuation under the COVID 19 early release rules to recontribute those amounts without counting towards the non-concessional cap. The amendment also confirmed they cannot be claimed as a tax deduction.
CPA Australia external affairs manager Jane Rennie said allowing members to re-contribute COVID-released super savings will help restore their long-term financial security and mean they are less dependent on government support in retirement.
Another proposed amendment would also increase the cap at which a 15 per cent concessional tax rate applies to superannuation contributions by $5,000 to $32,500 for people aged 67. The cap then increases by $5,000 a year each year until a person turns 71, however this proposal was rejected by the government.
Meanwhile, the six-member bill amends the SIS Act, Corporations Act, ITAA 1997 and SUMLMA to increase the maximum number of allowable members in SMSFs from four to six. This bill also amends provisions that relate to SMSFs and small APRA funds.
These amendments ensure continued alignment with the increased maximum number of members for SMSFs.
The Government said increasing the allowable size of these funds increases choice and flexibility for members. SMSFs are often used by families as a vehicle for controlling their own superannuation savings and investment strategies.
For families with more than four members, currently the only real options are to create two SMSFs (which would incur extra costs) or place their superannuation in a large fund. This change will help large families to include all their family members in their SMSF.
The SMSF Association in its Twitter update that whilst it doesn’t expect this change will lead to a significant increase in the number of SMSFs being established, it will provide greater investment flexibility, choice and lower fees for those in a position to utilise it.
The expansion of members creates different strategic considerations that can be both positive and negative for SMSFs, and preparation will be needed to see if the changes will be a good fit for the SMSF, according to technical specialists.
The amendments apply from the start of the first quarter that commences after the act receives royal assent.
I need more information on this comment.
[quote]no deductions for recontributions of amounts withdrawn under COVID-19 early release, where recontribution is made from 1 July 2021 to 30 June 2030.[/quote]
Does this mean that if someone has withdrawn an amount under covid early release, they aren’t entitled to a deduction for 10 years? So if they needed help at the time, they get kicked again for happening to have an improvement to their situation and wanting to put money towards retirement?
Over the next 10 years, they will have the ability to contribute over $1.375 million of contributions (not including cap increases or utilising the bring forward arrangement). If someone can contribute this much into super, do they really need another tax break to build wealth?
It wasn’t taxed on the way out. Why should they get a tax deduction on the way in?
I imagine this is to deter people thinking they can access future relief just to get a tax deduction when putting it back in later.
These changes require royal assent, which may not be forthcoming before 30 June. Will the effective date for the bring forward rule changes for 65 and 66 year olds be 1 Jul 2020 as stated in this article or some later date?
Am I reading this right? A person aged 71 will have a concessional cap of $52,500.00?
If so, that is ridiculous. If a 71 year old can benefit from a $52,500.00 tax deduction, they either would have enough in super already or earn enough to not need a large tax deduction to build wealth. Stop making it easier for the rich to become richer. Look out for the little guys!
That bit didn’t get through, thankfully. Has to be the most complicated and non-sense amendment ever proposed, out of self-interest by someone who has limited understanding of the system.