The SMSF Association has applauded measures in this year’s Federal Budget that aim to reduce complexity and make it easier for older Australians to top up their superannuation.
Commenting on the Federal Budget that was handed down this evening by Treasurer Josh Frydenberg, SMSF Association CEO, John Maroney, says after a few quiet budgets for the SMSF sector, this year’s Budget includes some welcome measures.
“In our 2021 Federal Budget submission, we advocated for reforms to the residency rules for SMSFs and for an amnesty period to allow SMSF members stuck in legacy pensions to convert to more conventional style pension products, and we are pleased both measures are included in this year’s Budget.
“Another important reform is introducing the measures that will make it easier for older Australians to top up their retirement savings by removing the work test for non-concessional contributions for individuals aged 67 to 74 years.
“It means individuals who may have previously been unable to top up their retirement savings because they are no longer working may soon be able to do so.
“In addition, members aged 67 to 74 years will also be able to bring forward their non-concessional contributions in the same way that someone under the age of 65 can do.
“Regarding residency rules, we argued in our submission that the existing two-year safe harbour exemption under the central management and control test is too short in the context of modern work arrangements, where executives and other staff are often expected to commit to an overseas placement for more than two years, and that this period should be increased to five years.
“An extension to five years was announced in tonight’s Budget, as well as the removal of the active member test that was also one of our recommendations.
“The removal of the active member test significantly simplifies the residency rules for both SMSFs and small APRA funds.”
Lowering the eligibility age to make downsizer contributions was also welcomed.
“Contributing the allowable proceeds from the sale of a dwelling that qualifies as a main residence for the downsizer provisions has proven to be a popular strategy for individuals who are 65 or over.
“Reducing the age at which downsizer contributions can be made from 65 to 60 provides more flexibility for members aged 60 to 64 to top up their retirement savings. This is particularly useful in a low contribution cap environment.
“We also welcome the Government’s decision to abolish the $450 monthly Superannuation Guarantee threshold which will benefit many lower paid employees, especially women in casual and part time employment.”
Mr Maroney cautions SMSF investors and advice professionals from acting on any of these measures before they have been passed into law. Other than the announcement relating to legacy pensions, the new measures are expected to start from 1 July 2022.
Explore the Federal Budget SMSF announcements during July’s Technical Summit 2021 program.