Time running out for 2019 budget changes
Time is running out for the government to introduce legislation around the changes it had flagged to super in the 2019 budget, with practitioners concerned the proposed 1 July 2020 start date of the new rules may have to be delayed, according to a number of industry experts.
SuperConcepts general manager of technical services and education, Peter Burgess, told SMSF Adviser that clients approaching their 65th birthday in particular could find themselves significantly worse off if there were further delays to the introduction of the 2019 budget initiatives.
“The 2019 budget contained a package of reforms designed to provide older Australians with greater flexibility to contribute to super,” Mr Burgess said.
“These changes are slated to start from 1 July 2020, but with the government already having a very full 2020 legislative agenda, there is growing concern that these reforms will not be passed in time for a 1 July 2020 start.
“This uncertainty is particularly concerning for clients who are turning age 65 during the 2019-20 income year, are still gainfully employed and want to take advantage of the bring-forward rules for non-concessional contributions.”
Measures contained in the 2019 budget included the extension of the bring-forward provisions to those aged 65 and 66, the removal of the work test requirement for those aged 65 and 66, and the extension of the spouse contribution age limit from 69 to 74.
Mr Burgess said changes to the bring-forward rule could be particularly costly for people in this age group if delayed, due to the potential amount of super contributions they could miss out on.
“If the rules are not changed they will need to act before the end of the 2019-20 income year to take advantage of the bring-forward rule,” he said.
“However, if the rules are changed as proposed in the 2019 budget they will have an extra two years to take advantage of the bring-forward rule.
“Furthermore, by making a $100,000 non-concessional contribution in this income year and next, and then triggering the bring-forward rule with a $300,000 contribution in the income year they turn 67, they will end up with an additional $200,000 in super compared to making a $300,000 non-concessional contribution in this income year.”
Lonsdale Financial Group chief executive Mark Stephen agreed with Mr Burgess, pointing out that SMSF advisers were between a rock and a hard place until the proposals were legislated.
"These measures are welcome announcements, however it is important to understand that they are just that - suggested promises by the government," Mr Stephen said.
"This makes it difficult for advisers to plan how to best maximise non-concessional contributions and the use of the three-year bring forward. Advisers will need to discuss both options with clients and be on standby to react if legislation is passed."
