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changes to superannuation

Important Changes to Superannuation

Important changes to superannuation have been made with the Federal Government’s new ‘Protecting Your Super’ legislation now in full effect as of July 1st, 2019. These reforms are designed to safeguard Australian’s superannuation savings from being eroded by unnecessary fees and insurance policy premiums.  

Inactive accounts 

One of the major reforms within the new legislation is that super providers are now required to cancel the insurance of any inactive super accounts. Inactive accounts are defined as any account that has not received a contribution or rollover in more than 16 months.  

If your account is considered inactive your super provider will have to give you notice before cancelling your insurance, where you will have the opportunity to choose to keep your insurance if you desire. If you make any contribution or rollover into an account that is considered inactive, this will re-activate the account and prevent any potential insurance cancellation. In order to ensure that your insurance is not cancelled it is important to make sure regular super contributions are being made into your account. 

Other changes to superannuation include any individuals with an inactive account that has a balance of less than $6000 will now have their account transferred to the Australian Taxation Office (ATO) unless otherwise advised by the account owner. After receiving the money from the inactive account, the ATO will then attempt to transfer this money to any other active account that the person may have, to ensure that their balance is $6000 or more. If the ATO is unable to complete this transfer, they will securely hold the money and the account owner will not be charged any fees. Moreover, fees will be capped at 3% per annum for accounts with a balance of less than $6,000.  

Other changes to Superannuation 

Outside of the changes made to inactive accounts, the government has rolled out a number of other important reforms. Namely, you will no longer be charged any exit fees if you decide to switch super funds.  

Moreover, the pension work bonus will be increased to $300 per fortnight. This means if you’re currently working and receiving the age pension your work bonus will be increased from $250 to $300 with the exclusion of some of your income from the Centrelink income test.  

You will also be able to make super contributions in your first year of retirement under the new reforms. Specifically, if you are aged between 65 and 74 and your super account has a balance of less than $300,000 as per the end of the previous financial year, you will be eligible to make voluntary contributions to your super without the need to meet the conditions of the work test. It should be noted that this can only be done once, and you will not be able to make subsequent contributions in future years.  

Changes have also been made to the co-contribution thresholds. The government will now pay 50 cents for every dollar of any after-tax super contributions you make if your total income falls between $38,564 and $53,564 during the 2019/2020 financial year.  

Lastly, eligible Australians will now be able to make catch-up concessional contributions using unused concessional contribution cap amounts from prior years. Previously, from 1st July 2018, you were able to make capped concessional contributions if your super account balance was less than $500,000 in the previous financial year. Concessional contributions are generally taxed up to 15% instead of your marginal tax rate of up to 47%. As of the 1st July 2019, this will be the first year in which you will be able to make extra concessional contributions using any unused contribution cap from a previous year.  

Where to from here? 

Superannuation is one of the best ways to save on tax while simultaneously building your retirement nest egg. However, understanding the relevant legislation and making the correct financial decisions to get the most out of your super can be challenging. If you have any questions regarding the Federal Government’s new changes to superannuation or want to speak someone who can provide you with technical advice on your super or SMSF, don’t hesitate to get in touch with one of our superannuation experts.  


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