The 2020 Federal Budget has seen a number of changes to tax, as well as superannuation. Importantly, these are just proposals and legislation would need to be passed for any of these changes to take effect. 

The proposed changes are mainly about the way super funds operate, including how the default system works, fund performance and comparing super funds. 

You can read a summary of the Budget 2020-21 changes relating to super below: 

Superannuation Guarantee timeline remains untouched

Despite speculation in the media, the legislated timetable to increase the amount of super that employers need to pay workers (known as the Superannuation Guarantee) has been left untouched. This means that we still expect to see the Superannuation Guarantee rise from 9.5 per cent to 10 per cent from 1 July 2021 next year.

Income-tax cuts brought forward

The tax cuts that were scheduled to start on 1 July 2022 have been brought forward and will be backdated to commence on 1 July 2020. This will see the 19 per cent tax rate threshold increased from $41,000 to $45,000. The 32.5 per cent tax threshold will be increased from $90,000 to $120,000.

If the legislation containing the tax cuts is passed, those affected will pay a little less tax each week. The tax cuts will be reflected in their 2020-21 tax return and may result in a refund of “extra” tax paid since 1 July 2020.

For this round of tax cuts, those earning:

• $50,000 a year will get $1,080 back; 
• $90,000 a year will get $1,215 back; and
• $120,000 a year will get $2,565 back.

The Low Income Tax Offset will increase from $445 to $700.

The Low and Middle Income Tax Offset will also stay for an extra year, meaning eligible individuals will get $1080 and dual income couples will get $2160.

Cash payments for welfare recipients

The government will make two payments of $250 to select Australians receiving welfare. The payments will be paid in December 2020 and March 2021. 

Those on the age pension, disability support pension, carer payment, family tax benefit, family tax benefit lump sum, double orphan pension, carer allowance, Commonwealth seniors health card, pensioner concession card and veteran card will be eligible.

New tool to compare super funds

For those entering the workforce for the first time or wanting to review their superannuation, a new online “YourSuper” comparison tool will be built that allows members to compare and select a superannuation product that meets their needs. By 1 July 2021, the YourSuper tool will provide a table of MySuper products ranked by fees and investment returns. It will also show your current super accounts.

Changes to the way default superannuation works

Changes to the default super system will mean that once you open a superannuation account, it will now follow you to a new job unless you choose otherwise. 

This means that your employer will pay your super to your existing super fund if you have one, unless you select another fund. The change is aimed at stopping the creation of unintended multiple super accounts.

If you don’t have a super account and don’t choose one, your employer will pay your super into their nominated default super fund.

Superannuation performance test introduced

By 1 July 2021, super funds will have to meet an annual performance test conducted by the Australian Prudential Regulation Authority. Funds that fail the test will have to notify members of their underperformance. 

If a product underperforms over two consecutive annual tests, it won’t be able to accept new members until its performance improves.

The funding for this initiative will be paid for through increased levies on regulated financial institutions.

Strengthened obligations for super trustees

The government is raising the standard for super funds by strengthening obligations on super fund trustees to ensure their actions are in the best financial interests of members. This includes providing members with key information about how they manage and spend members money in advance of Annual Members’ Meeting.

Deferring the start date of the Retirement Income Covenant

The government is deferring the commencement of the Retirement Income Covenant which will require trustees to develop a retirement income strategy for their members. This measure was announced in Budget 2018-19. The implementation date has been moved from 1 July 2020 to 1 July 2022 to allow continued consultation and legislative drafting to take place during COVID-19. 

Temporary early access to super (existing measure)

As per government announcements earlier this year, people financially affected by the Coronavirus can access up to $10,000 from their superannuation account under the temporary early release scheme. Eligible individuals can apply online via myGov to access their superannuation before 31 December 2020.

There is no tax payable on superannuation released under this temporary arrangement and Centrelink or Veterans’ Affairs payments will not be affected.

Temporary reduction to minimum super drawn down rates (existing measure)

The minimum drawdown rates for account-based pensions were reduced by 50 per cent for the 2019-20 and 2020-21 income years. 

In-home aged care expanded

The government will provide an extra 23,000 places in its home care package that helps elderly people wanting in-home aged care. Funding will also be provided to improve skills in the aged care workforce. 

First Home Loan Deposit Scheme expanded

An extra 10,000 people will be able to use the First Home Loan Deposit scheme, which allows first home buyers to borrow with a 5 per cent deposit and avoid lenders mortgage insurance.

The value of the properties they can purchase has also been increased to $950,000 in Sydney, $850,000 in Melbourne and $650,000 in Brisbane.

Women’s economic security statement

The Budget includes a Women’s Economic Security Statement, with $240 million in measures and programs. These include:

• employment programs to support women’s leadership and development, and increase opportunities for women in science, technology, engineering and mathematics (STEM), business and male-dominated industries. 
• the $50 million Women@Work Plan that will expand the Women’s Leadership and Development Program grants and establish a Respect@Work Council to address sexual harassment at work. 
• an additional $35.9 million to expand the Boosting Female Founders initiative to provide women entrepreneurs access to expert mentoring and business advice.
• $25.1 million to assist 500 women through STEM Industry Cadetships or Advanced Apprenticeships. The government is expanding the Women in STEM and Entrepreneurship (WISE) Grants. The program will fund projects led by business, industry and the community which focus on increasing girls’ and women’s participation in STEM.

Capital Gains tax exemption for granny flats

The government will provide a targeted capital gains tax (CGT) exemption for granny flat arrangements where there is a formal written agreement. The exemption will apply to arrangements with older Australians or those with a disability. The measure will have effect from the first income year after the date of Royal Assent of the enabling legislation.

Super changes from the 2019/20 budget 

A reminder of some of the changes from last year’s budget that have been introduced:

• Voluntary superannuation contributions (both pre and post-tax) are able to be made by those aged 65 and 66 without meeting the work test from 1 July 2020.
• The age limit for spouse contributions to superannuation was increased from 69 years to 74 years from 1 July 2020.
• The Protecting Your Super and Putting Members Interests First legislation which focus on protecting under 25s, low balance and/or inactive super accounts, by ensuring members’ super balances are not eroded by insurance premiums, came into effect from 1 July 2019 (for inactive super accounts) and 1 April 2020 (for under 25s and low balance accounts).  

Attend a webinar

If you have questions about your super register for the Super 101 webinar or Investment Update webinar where you can hear from our Chief Investment Officer Graeme Miller.  You can register using the button below.

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Need help?

If you have any questions about these new measures that are coming into place give us a call on 1300 033 166 or fill in our online form to send us a question.  TelstraSuper have a team of phone based Advisers who can help you maximise your super. Phone advice is included in your membership and comes at no additional cost.