Is this the calm before the super storm?
Whilst it may have taken us by surprise that there wasn’t much by way of superannuation in this year’s Federal Budget, perhaps in hindsight it was always going to be this way.
In January 2023 the government announced its plans to legislate the ‘Objective of superannuation’ – this was followed by a period of consultation and an expectation that legislation would be introduced in the first half of the year. Time is ticking. Of course, this creates the classic chicken and egg debate because you can’t subsequently release policy until you know that the policy will meet its objective. Not that it stopped the release of the ‘Better targeted superannuation concessions’ measure to target members with balances in excess of $3 million.
So, does this mean we will have a post legislated objective superannuation policy launch? We’ve already seen the government redefine their pre-election comments of “no changes to superannuation” to “no major changes”, therefore will this result in a new definition of minor v major? To take that one step further, we’ve also seen timing become the ‘smoke and mirror’ approach by introducing measures from 1 July 2025, thereby avoiding any changes within the current election cycle, and arguing no election promises have been broken.
Let’s not forget there are already previously announced measures collecting dust that we need resolution on sooner, rather than later.
There is no doubt that the legacy pension amnesty issue is a little concerning. Other than the SMSF Association previously providing an update to seek reassurance from the government that the legacy pension conversion was still on the table, there has been nothing official from the government (including in last year’s budget 2.0 in October 2022).
Importantly, as part of our involvement with the consultation between the SMSF Association and Treasury about the ‘Better Targeted Superannuation Concessions’ it was highlighted that having an unresolved position on legacy pensions creates uncertainty about how defined benefit interests are considered for balance and earnings purposes. Furthermore, resolving this outstanding measure would also help to ensure that some of these larger balances (> $3 million) are actually removed from the superannuation system.
It is clear that any policy on these legacy pensions needs to be further considered, consulted upon, and preferably introduced, prior to the introduction of the aforementioned targeted superannuation concessions.
SMSF residency rules
The government did announce in their 2022–23 budget in October 2022, that the original intended start date of 1 July 2022 would be deferred to allow further time for this policy measure to be legislated and implemented.
The 2023–24 budget did not make any further reference to this previous announcement, so our expectation is that this measure will still move ahead at a future point in time, taking effect from the following income year after Royal Assent is received.
These amendments are quite simple to resolve, expanding the temporary absence period from two to five years and abolishing the Active Member Test. With little or no resistance from within the SMSF sector, it would be great to see these matters resolved as soon as possible.
What other super changes occurred in the budget?
One measure that has made the budget by stealth is that the government has not announced any further temporary minimum pension reduction – this includes no phase-out from 50 per cent to 25 per cent as we did see during the global financial crisis (GFC). Therefore, it appears likely that the 2023–24 minimum pension will return to their normal percentages.
|Age||Minimum pension payment 2023-24||50% reduced minimum pension payments|
|95 or more||14%||7%|
Market linked pensions will return to their normal +/- 10% of the regulatory amount.
The other measure that was announced prior to the federal budget was aligning the payment of superannuation guarantee to payment of salary and wages. From 1 July 2026, employers will be required to pay superannuation at the same frequency as salary and wages are paid, moving from the existing quarterly obligation.
What might the future hold?
If we apply a ‘crystal ball’ to the announcements made about the objective of super, it’s conceivable that there are further changes on the horizon, in particular in the area of preservation. This may include (but not be limited to):
- Early release of superannuation – compassionate grounds (e.g. elective surgeries)
- First Home Super Saver Scheme
How and when the government would look to address these issues after settling on a legislated objective of super, we need to wait and see…but it’s fair to say that we haven’t seen the last of any changes this government intends to make to superannuation.