The best thing that can be said about the budget this year is that they haven't made any more big changes to Superannuation. In most respects, it's a bit of a 'do nothing' budget. Apart from the obligatory pre-election tax cuts that is.  Although with most people's wages going up less than inflation for the last few years, a maximum of $5-10 per week tax cut probably isn't going to buy too many votes!

Here are a few issues that relate to Superannuation (starting from July 2019):

  • A ban on exit fees and a 3 percent cap on total fees on account balances below $6,000. This will allow us to consolidate some of those very old funds that have high admin costs, but still had an exit fee.
  • Inactive super accounts with a balance of less than $6,000 will be mandatorily sent to the ATO, which will then attempt to reunite the funds with active accounts via a data-matching project.
  • People aged 65-74 with balances below $300,000 will receive a one-year exemption from the work test for voluntary contributions.
  • It has also been confirmed that SMSFs will be allowed to have six members, up from the current limit of four.
  • The Treasurer also announced that default life insurance cover within super will switch from 'opt out' to 'opt in' for members younger than 25 in one of the more controversial changes in the 2018 federal budget.
  • Aged care assistance.

A more interesting point is the opportunity for super funds to have a 'Comprehensive Income Product for Retirement'. This will incorporate a deferred lifetime annuity and can help us plan against 'longevity risk'.  (This is where we live longer than our investment funds.)

As predicted, the government is set to increase the number of home care places by 14,000. This increase will come at a cost of $1.6 billion and will take four years.

The government will also be extending their 'Pension Loan Scheme'. This means that the government will effectively become a bank offering 'reverse mortgages'.  This allows retired homeowners to increase their pension by an additional 50% of the full pension. The payments and interest will be paid from the sale of the home.

Surplus? Debt?

ScoMo announced the budget is forecast to return to a modest balance of $2.2 billion in 2019-20. Really? While $2.2 billion sounds like a lot, it actually relies on very favorable business conditions and is in fact, little more than a rounding error. Together with changing tax rates in 6 years this could be described, to quote Yes Minister’s Sir Humphrey Appleby as "a very courageous prediction".

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Brett Dillon is an Authorised Representative (No: 265081) of BD Financial Advisory Pty Ltd (AFSL No: 502401).
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