Federal Treasurer Scott Morrison’s third budget includes measures considered to have a positive effect on SMSFs and contains no significant tinkering with the superannuation system.
The 2018 budget papers confirmed the maximum number of members to be allowed in an SMSF will rise from four to six, a proposal announced in May by Revenue and Financial Services Minister Kelly O’Dwyer.
The government said it will change the annual audit requirement to a three-yearly requirement for SMSFs with a history of good record-keeping and compliance, a move intended to cut red tape for SMSF trustees with clear audit reports and timely lodgements.
The measure is earmarked to start on 1 July 2019 following stakeholder consultation.
The government also proposed making technical amendments to the transition-to-retirement income stream (TRIS) rules relating to the death of a member and addressing double taxation in respect of deferred annuities purchased by a super fund or retirement savings account.
Under the More Choices for a Longer Life package, the government will introduce a one-year exemption from the work test for voluntary contributions to super for people aged 65 to 74 and with super balances below $300,000.
Additionally, it will allow individuals whose income exceeds $263,157 and who have multiple employers to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.
The measure will allow eligible individuals to avoid unintentionally breaching the $25,000 annual concessional contributions cap as a result of multiple compulsory SG contributions.
The government announced it will provide $10.6 million to the Australian Securities and Investments Commission to assist its involvement in the banking royal commission, with the cost to be offset by various industry levies.
“Most of the measures are favourable for SMSFs,” SuperConcepts SMSF technical and private wealth executive manager Graeme Colley told smstrusteenews.
“One thing we’ve really supported for a very long time is the TRIS with reversionary benefits payable on the death of a member, which has technically been difficult and very confusing for people, so it was good to see that treatment confirmed in the budget.
“We also think the abolition of the work test for the first year is a good idea because there were real technical difficulties for some people on whether you could make a contribution or not, so this makes it much clearer in the way that the rule works.
“Increasing the number of SMSF members in a fund we think will only have a minor impact as we mainly see funds with one or two members, so it’s not going to change the world, but it’s still encouraging, particularly for couples who have more than two children.”
Colley added SMSFs will need to be wary of possible fee increases as a result of the ASIC levies, though there were no details contained in the budget papers.
QMV legal and risk principal consultant Jonathan Steffanoni said it was a “positive budget for SMSF trustees and members”.
“There was an interesting announcement focused on preventing inadvertent concessional cap breaches by employees, so it looks at individuals on a high income with multiple employers,” Steffanoni told smstrusteenews.
“This is certainly a sensible reform which addresses something that was probably unintended in the first place.
“The work test measure is another sensible one for SMSFs as it gives SMSF members the ability to contribute a little bit more freely around that retirement period.”
The government also announced measures to improve choice of retirement income products, notably clarifying the age pension treatment of innovative income stream products.
The Pension Loans Scheme to facilitate home equity release will be expanded to give all retirees of age pension age greater choice and flexibility to meet their consumption needs in retirement.
A further measure from the government was the scrapping of exit fees with regard to superannuation benefit rollovers.