What impact does the Budget & Federal election have on your SMSF clients?

The budget was recently handed down and the federal election has finally been called and will be held on the 18th of May 2019. What impact does this have on your SMSF clients?

Federal budget 2019/20

The main message from the budget was delivering a surplus election budget. As expected, superannuation was left largely untouched, with only suggested minor changes to the existing framework as follows:

Spouse contribution age limit - The maximum age at which a spouse contribution can be made will be increased from age 69 to age 74. The limit applies to the age of the spouse into whose super account the spouse contribution is being made. This measure is proposed to commence from 1 July 2020.

Non-concessional (NCC) bring forward - The age restriction for the bring-forward of up to two years of the NCCs will be extended by two years. Age will be extended to allow those aged 65 and 66 to use the bring-forward arrangement. This measure is proposed to commence from 1 July 2020.

Reducing red tape for superannuation funds — ECPI changes - The Government will allow superannuation fund trustees with interests in both the accumulation and retirement phases during an income year to choose their preferred method of calculating exempt current pension income (ECPI). This measure is proposed to commence from 1 July 2020.

SuperStream Rollover standard

The Government will provide funding to the ATO to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements. The start date of Self-Managed Superannuation Funds rollovers in SuperStream will be delayed until 31 March 2021 to coincide with the expansion of the SuperStream Rollover Standard

Federal election – 2019

With the federal budget fast approaching, you and your clients should be aware of what the potential incoming superannuation policies are should Labor be elected. These are summarised as follows:

  • Annual non-concessional cap (NCC) to be reduced to $75,000 from current cap of $100,000. It is our understanding that the bring forward of NCCs will still be permitted under the reduced cap.
  • Catch-up concessional contributions to be abolished, even though our clients have been unable to utilise this measure. Under the current arrangement, eligible clients will be able to make catch up concessional contributions from 1 July 2019
  • Division 293 income threshold for the extra 15% super contributions tax for high income earners to be lowered to $200,000 p.a.
  • Deductibility of personal contributions for employed persons to be removed. It is our understanding that the 10% test will be reintroduced to assess who is eligible to make personal deductable contributions
  • Limited Recourse Borrowing Arrangements (LRBA) by SMSFs to be prohibited
  • Increase in the Superannuation Guarantee rate to 12% ahead of the current timetable. No timeframe established but certainly within the next 3 years
  • Restriction on franking credit refunds to SMSFS

Should Labor be elected, there is no guarantee the policies will be adopted. Even so, a reasonable number of these policies could come through in some shape or form. With all this in mind, your super clients should be looking at:

  • maximising contributions to super under the current limits and options
  • LRBAs – for clients who were looking at this. Also, any clients that were looking at acquiring property off the plan or in the future, is there any measures they can put in place now to demonstrate a borrowing arrangement is in place
  • Reviewing current fund investments to ensure that the fund is still able to deliver the income should a franking credit refunds be removed

Please contact your Partners Wealth Group advisor on 1800 333 143 to discuss how we can best structure you clients funds during this turbulent time period.