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October 12th, 2020
With last Tuesday’s Federal Budget, the Government looked to tackle the economic impacts of the coronavirus, bringing forward proposed income tax cuts and introducing a new wage subsidy.
Somewhat unexpectedly, a package of superannuation reforms was also included. The “Your Future, Your Super” reforms could see members being “stapled” to one super fund for life. We explore some of the significant Budget measures below.
Billions in tax cuts and a new wage subsidy
Planned income tax cuts for millions of low- and middle-income Australians have already passed the Parliament since the Budget was announced and will be backdated to July this year. This will see:
The Low and Middle Income Tax Offset will be extended for another year, meaning eligible individuals and dual income couples will receive tax reductions of up to $1080 and $2160 respectively.
Use the ABC’s interactive tax calculator to see what you could expect to save.
A new wage subsidy, JobMaker, has been proposed to support younger workers heavily impacted by the recession. Businesses (except the big banks) that hire unemployed people under age 35 for at least 20 hours a week could receive up to $200 per employee per week as a wage subsidy. The Government says this measure will support 450,000 new jobs.
A super fund for life
Instead of workers picking up a new super account when they change jobs, the Government is proposing “stapling” members to their existing super fund for life. New entrants to the workforce would choose their own super fund or have a super account created by their first employer.
Australians could still choose to switch super funds at any point during their working life. This option to choose is important for:
While this measure is aimed at preventing the problem of multiple super accounts – with Australians currently paying $450 million annually in unnecessary fees – it’s worth noting that nothing in the “stapling” proposal deals with the existing backlog of six million multiple accounts.
Find out more about consolidating accounts here.
If passed, this measure would come into effect on 1 July 2021.
Comparison tools and trustee transparency
The Government plans to launch “YourSuper”, an online comparison tool which would help new workers choose a super fund or help those wanting to switch funds to compare fees and investment returns.
By 1 July 2021, super funds will also have to meet an annual performance benchmark overseen by the regulator, APRA, and notify members if they have underperformed. Any fund that underperforms two years in a row will be banned from accepting new members until they can demonstrate improved performance.
This measure will apply to default MySuper funds – such as First Super’s Balanced Option – from July 2021, and to all other options from July 2022.
There will also be greater scrutiny of superannuation fund trustees to ensure their actions are in line with members’ best interests. This includes providing more information about how they manage and spend members’ money.
No change to the Superannuation Guarantee (SG) timeline
The Treasurer did not address the SG timeline in the Budget, and it remains unclear whether this will increase as planned to 10% on 1 July 2021 and to 12% by 2025, or if the Government will backflip on its promise and freeze or delay the increase.
Early Release of Super Scheme to end
The temporary Early Release of Super Scheme – introduced earlier this year to support members in financial distress due to the coronavirus – was not addressed in the Budget. It has since been confirmed that, for now at least, the measure will not be extended beyond the 31 December 2020 cut-off.
To discuss any of the above, or for help with any super matter, please contact the Member Services Team on 1300 360 988 or mail@firstsuper.com.au.
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