On 2 April 2019, Josh Frydenberg announced his first Federal Budget as Treasurer. The 2019 budget announces a small number of reforms that relate directly to superannuation, proposed to take effect 1 July 2020. These proposed reforms include:
Changes to the ‘work test’
The ‘work test’ refers to restrictions to super contributions made by people over age 65. Currently, those aged 65 and over are required to satisfy a ‘work test’ every financial year to be able to make voluntary contributions to their super account (either before-tax or after-tax).
This means that those aged 65-74, must be ‘gainfully employed’ and work for a minimum of 40 hours in any consecutive 30 day period through the financial year in order to make voluntary contributions to super.
The new measure would allow those aged 65-66 to make contributions without being obliged to meet the work test. The objective of the change is to align the work test with eligibility for the Age Pension (scheduled to reach age 67 from 1 July 2023).
Changes ‘bring-forward’ arrangements
The ‘bring-forward’ rule is a provision that allows eligible members to make non-concessional (after-tax) contributions amounting to more than the annual contributions cap of $100,000 over a three-year period.
Members can make up to 3 years’ worth of non-concessional contributions in the first year by bringing forward the caps of the next 2 years. Currently, this rule only applies if you are under the age of 65.
Changes propose that those aged 65 and 66 will also be able to make up to three years of non-concessional contributions under the bring-forward rule.
Changes to spouse contributions
Topping up your spouse’s retirement savings account with some of your own super contributions can be a great way to help them save for life after work and to possibly save on tax.
Current rules state that the receiving spouse must be under the age of 65, or if they’re between 65 and 69 (inclusive) they must meet ‘work test’ requirements.
The new measure proposes that those up to and including age 74 will be able to receive spouse contributions.
It’s important to remember that with a Federal election looming, these policies may not come to fruition. Shadow Treasurer, Chris Bowen, has confirmed that if Labor wins the election, they will issue a new budget in the third quarter of this year.