Learn more about the latest super reforms and what they could mean for you.
Putting Members’ Interests First legislation
Putting Members’ Interests First (PMIF) law was passed in September 2019. It aims to prevent certain people being charged for insurance inside their super that they may not need. The PMIF law affects:
- members with a super balance under $6,000
- new members aged under 25
Automatic insurance not available to some people, unless it’s requested.
Previously, insurance inside super was often provided automatically to anyone who signed up to their employer’s super plan. But this changed on 1 April 2020.
These days, if you:
- have an account balance below $6,000,
- are under 25 years old, or
- haven’t made a contribution or rollover into your account for 16 months,
you won’t get insurance applied automatically to your super account until you reach the above eligibility requirements. Unless you request insurance in the first 120 days of starting your job. Find out more
People with a super balance under $6,000
Under the new PMIF laws, super providers were required to check the balance of all super accounts with insurance on 1 November 2019.
Where an account balance was below $6,000 (and no exemptions apply), the super fund must let the client know their insurance will be cancelled, unless:
1. the balance reaches $6,000 before 1 April 2020, or
2. the client requests to keep their insurance.
This was a one-off requirement, and the cancellations were finalised on 1 April 2020. If you received a letter saying your insurance was cancelled because the super balance was below $6,000, there may be a window of time where it can be reinstated. Learn more
Protecting Your Super legislation
Effective from 1 July 2019
The Protecting Your Super (PYS) package aims to protect super balances becoming eroded by fees and insurance premiums in inactive super accounts.
An account is considered inactive when it hasn’t received a rollover or contribution for 16 months.
The PYS laws are different to the Putting Members’ Interests First, although there can be some cross-over laws. Learn more.
There are four main areas of the PYS legislation:
Super providers must cancel the insurance inside inactive super accounts. Generally, an account becomes inactive if it hasn’t received a contribution or rollover in the previous 16 months. Before cancelling, affected members must be told their insurance may be cancelled and given the opportunity to keep it.
Members can stop their insurance being cancelled by:
- letting their super provider know they’d like to keep it, or
- making a super contribution or rollover (of any amount) into the inactive account.
Making regular contributions can prevent an account becoming inactive in the future.
2. Inactive super accounts with low balances will be closed
Many inactive accounts with a balance below $6,000 will be closed, and the balance transferred to the Australian Tax Office. Where possible, the ATO will then connect this super money with an active account for each member.
Exceptions apply, including if you have insurance or you ask for your account not to be sent to the ATO. Learn more.
3. Cap on fees for accounts with low balances
Fees are capped at 3% p.a. for accounts with balances under $6,000 as at 30 June of each year.
If an account with less than $6,000 is closed before 30 June, the 3% cap applies on a pro-rata basis.
4. Switch funds without paying an exit fee
Exit fees are banned. Everyone can now switch their super between different providers without paying a fee.
Exit fees also won’t apply where money is withdrawn, and the account closed.
Other superannuation changes from 1 July 2019
Pension work bonus going up to $300 per fortnight
If you’re working and receiving the age pension you could be entitled to the Work Bonus, which excludes some of your pay from the Centrelink income test. This bonus is increasing from $250 to $300 a fortnight, meaning you’re able to keep more of your income, or work for short periods with little or no effect on your age pension.
Eligible retirees can make super contributions in the first year of retirement
If you’re aged between 65 and 74 and you had less than $300,000 in your super account at the end of the previous financial year, you can still make voluntary contributions to your super in this financial year without needing to satisfy the work test. But you can only take advantage of this once—you won’t be able to make contributions in subsequent financial years. This opportunity is also only available in the year immediately following the year in which you last met the work test.
Super co-contribution scheme threshold changes
If your total income is between $38,564 (up from $37,697) and $53,564 (up from $52,697) during the 2019/20 financial year, and you make an after-tax contribution to your super fund, the federal government will pay you 50 cents for each dollar you contribute to your super fund, up to a maximum of $500.
To be eligible for the co-contribution scheme, you will need to satisfy a work test, be under the age of 71, and have a super balance of less than $1.6 million.
Catch-up concessional contributions allow eligible Australians to put more into super
This is the first year you can make additional catch-up concessional contributions using unused concessional contributions cap amounts from previous years, if you’re eligible.
The ability to make a catch-up concessional contribution applies to people whose total superannuation balance was less than $500,000 on 30 June of the previous financial year.
The five-year carry-forward period started on 1 July 2018 so the 2019-20 financial year is the first one when you can actually make extra concessional contributions using any unused super contribution cap from a prior year.
Work test rules still apply for people aged 65 or over and the usual notice requirements continue to apply for personal deductible contributions. And unused amounts can be carried forward regardless of your total superannuation balance but expire after five years.
You can read more about how to play catch-up with your super here.
Superannuation changes from 1 July 2018
Downsizers can make contributions to their super
Usually, people aged 65 to 74 need to satisfy a work test to make voluntary super contributions, while those aged 75 and over are generally unable to contribute to their super.
However, that changed on 1 July 2018, with people aged 65 or over now able to make contributions to their super of up to $300,000 using the proceeds from the sale of their main residence, regardless of their work status, super balance or contribution history.
For couples, both spouses can take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super.
To qualify, the contracts of sale must be exchanged on or after 1 July 2018. On top of that, the property that’s sold also needs to have been your (or your spouse’s) main place of residence at some point in time, and you need to have owned the home for at least 10 years.
Tax incentives for first home buyers
Eligible first home buyers can now withdraw super contributions that they’ve made since 1 July 2017 (up to a certain limit) to put toward their first home.
Under the First Home Super Saver Scheme (FHSSS), first home buyers who make voluntary contributions of up to $15,000 per year into their super can withdraw these amounts (in addition to associated earnings) from their super fund to help with a deposit on their first home.
You can use the FHSSS if:
- you live in the property you buy (or intend to in the near future as soon as possible) and
- you intend to live on the property for at least six months in the first 12 months that you own it.
If eligible, the maximum amount of contributions that can be withdrawn under the scheme is $30,000 for individuals or $60,000 for couples (plus the associated earnings).
To be able to withdraw this money, first home buyers must apply to the Australian Taxation Office and if they are eligible, a one-time-only withdrawal is permitted under the scheme.
Due to superannuation’s favourable tax treatment, this initiative may help first home buyers to build a deposit more quickly and supplement their savings outside of super.
Low income earners are entitled to a superannuation tax offset
For those earning less than $37,000, the ATO continues to pay the Low Income Super Tax Offset, which is a refund of contributions tax into your super account. If you meet the earnings criteria and concessional contributions are paid into your super account, either by your employer or yourself, you can expect a refund of up to $500 a year for the contributions tax deducted from the super contributions.
Like to know more?
If you’d like to know more about how the super rules affect your retirement savings, speak to your financial adviser. And if you don’t have one but are after some advice, you can call AMP on 131 267 or use our find an adviser search function.
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