TSA
Super stocktake – where we are at
NATASHA PANAGIS is head of superannuation at Tax and Super Australia.
8 selfmanagedsuper
Prior to the calling of the federal election, a number of superannuation measures either did not make it to parliament or the draft legislation failed to pass into law. Whether these lapsed bills and proposed measures will ever see the light of day will be dependent upon the outcome of the election and the agenda of the next government, whoever that may be. It was also no surprise to see superannuation was largely untouched in this year’s federal budget given the election was just around the corner. As they say, sometimes no news is good news and I think it’s safe to say many in the superannuation industry let out a sigh of relief. No changes to super will deliver welcome stability to the sector, which in turn will help individuals plan for their retirement with confidence. So, with the budget now over and the countdown to the federal election almost at an end at the time of writing, it’s worthwhile conducting a stocktake of what superannuation measures remain outstanding. There were two main superannuation measures announced in last year’s budget that are still up in the air. These are proposals to relax the residency requirements for SMSFs and small Australian Prudential Regulation Authority funds (SAF) and allowing certain legacy income streams to be converted to newer-style products. Relaxing the residency rules for SMSFs and SAFs will see the extension of the temporary absence rule from two to five years. Under current rules, SMSF trustees/directors living overseas who intend to return to Australia at some point can be away for a period of up to two years and the fund will still meet the central management and control test. Under the proposal, trustees/directors will be able to be temporarily away for up to five years and still meet this test. The second proposal as part of relaxing the residency rules is removing the active member test for SMSFs and SAFs altogether. This measure will allow SMSF and SAF members to continue to contribute to their fund while temporarily overseas. Under the current rules, contributions are prohibited unless an active member test is satisfied. Both of these changes were proposed to take effect from the start of the first financial year
after the changes receive royal assent, with the government aiming for a 1 July 2022 start date. Both measures are welcome changes considering the workforce is becoming increasingly globalised with many people able to work remotely from anywhere in the world. It’s comforting to know the current government realises things have changed and many people out there are global citizens. However, considering we still haven’t seen any draft legislation or consultation on either of these measures, it will be nothing short of a miracle if these measures are introduced into parliament and passed as legislation with a start date of 1 July. The third measure from last year’s budget was the proposal to provide a two-year window for people to exit certain legacy income streams. Under this measure, members will be able to commute and transfer the capital supporting their income stream, including any associated reserves, back into accumulation phase. The member can then decide whether to commence a new account-based pension, take a lump sum benefit or retain the balance in the accumulation account. This change was also proposed to take effect from the start of the first financial year after the changes receive royal assent. However, like the above two measures, this proposal is also yet to be drafted as a bill or amending regulations. Lastly and most importantly, the government finally announced in late March that it will amend the law to ensure the non-arm’s-length expenditure (NALE) provisions for superannuation funds operate as intended. Although the superannuation industry has welcomed this news, it doesn’t have much clarity on which SMSF arrangements with non-arm’slength parties will remain caught by the NALE rules. We look forward to a constructive consultation process with the government so the superannuation industry ends up with a practical solution. It remains to be seen whether the next government reintroduces existing lapsed legislation or advances previously announced measures that have not made it that far. Whoever is ultimately elected on 21 May, let’s hope the election promises of not overhauling the superannuation system and not introducing any new taxes carries throughout their parliamentary term and beyond.
