Preservation age, work test in government’s sights
Increasing the preservation age to 67 and scrapping the work test are likely to be high on the government’s super reform agenda in the medium term, while increasing SMSF member numbers may fall to the back of the list, according to SuperConcepts.
Addressing SMSF Adviser’s SMSF Summit 2019 in Sydney last week, the SMSF service provider’s general manager, Peter Burgess, said the government may soon look at increasing the age at which retirees could access their super in line with recent rule changes around contributions and redundancy payments.
“There’s no word yet on whether they will increase the preservation age because at the moment once you turn 65 it’s an automatic condition of release, but they’ve also increased the contribution age to 67 and everything seems to be in line with the age pension age of 67,” Mr Burgess said.
“We saw a bill which has now received royal assent in relation to redundancy payments where you can have a tax-free component up to the age of 67, where under the old rules you could only have a tax-free component up to 65.”
Mr Burgess added that given superannuants could soon make contributions up to the age of 67 without meeting the work test under rules slated to take effect from 1 July 2020, if the government did not increase the preservation age in line with this, it could create an attractive tax reduction tool for those aged 65 to 67.
“If they don’t increase the preservation age we will have a situation where clients aged 65 and 66 can make contributions whenever they want and take that money out whenever they want and get the tax concessions along the way, so I’m not sure that’s what they intend,” he said.
Further, Mr Burgess added that it would not be surprising to see the government propose to remove the work test for contributions, after scrapping its previous attempt in order to get the bulk of its 2016-17 super reforms through parliament.
“Clearly the government has a dislike for the work test because they have been chipping away at it for a number of years,” he said.
“In 2016 they wanted to do away with it altogether and were forced to put it back in, and last year in the budget they announced the 12-month exemption for recently retired clients. So I wouldn’t be surprised if at some point in the future they have another crack at getting rid of the work test altogether.”
However, Mr Burgess said the proposal to increase SMSF members to six, which had been a topic of discussion in the industry for some time, was not likely to be introduced to parliament in the near future.
“I think the government’s got other priorities in relation to super right now so I’d be very surprised to see this initiative being legislated any time soon,” he said.