On 17 June 2021, two long-awaited bills passed through the House of Representatives and the Senate. This includes the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 and the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020.
SMSF Maximum Allowable Members Increased to Six
From 1 July 2021, self managed superannuation funds and small APRA funds will now be able to have up to six members (previously, the limit was four). This measure was flagged prior to the 2019 Australian Federal Election and has finally raised sufficient crossbench support in the Senate to pass. For those wishing to make use of this measure, careful consideration should be given to the following:
- All members are still required to be trustees/ directors of a corporate trustee and will therefore need to be consulted with in relation to decision-making for the fund.
- For convenience and delegation of authorities, it is recommended that any funds considering this measure have a corporate trustee. While individual trustees can also delegate the ability to bind them, as a whole, to a smaller number of them, the legislative and other provisions dealing with a company’s ability to do this are more well developed and accepted, and are law, in a practical sense, by financial institutions.
It is also recommended that consideration be given to upgrading a fund’s trust deed as part of any new member admissions.
Age Changes to Bring Forward Rule for Non-Concessional Contributions
Up until now, a person under age 65 could bring forward up to two additional years of non-concessional contributions (i.e. they could make three $100,000 non-concessional contributions in one year, but then had to wait a further three years before making any further non-concessional contributions). In 2019, the Federal Government flagged that they would raise the maximum age to 67, without requiring a work-test after age 65. This measure has now passed, with effect from 1 July 2020.
Notable is that the law allows a person who turned 67 at any time during the 2020/ 21 financial year to make the bring forward contributions before 30 June 2021. However, it is important to note that this is still subject to the $1.6m total superannuation balance limit on non-concessional contributions. The total superannuation balance threshold is tested each year, as at the most recent 30 June, and covers balances across all superannuation funds.
However, given the contribution limits indexed upwards from 1 July 2021 (to $27,500 for concessional contributions and $110,000 for non-concessional contributions), careful consideration needs to be given as to whether this measure should be used.
As part of the negotiations by the Federal Government to obtain One Nation’s support for these measures, one further significant concession has also been agreed, which will take effect from the date of Royal Assent.
Remove Excess Concessional Contributions Penalty
From this point forward, the existing process to refund excess concessional contributions will continue, however the extra tax “penalty” on those contributions will no longer apply.
If you have any questions about these developments, or your superannuation fund more broadly, please contact your adviser or our office on (07) 3391 5055 or (02) 8039 0544 or via email.
Disclaimer: Any advice included in this article is general and has been prepared without taking into account your objectives, financial situation or needs. As such, you should consider its appropriateness having regard to these factors before acting on it. Before you make any decision about whether to acquire a certain financial product, you should obtain and read the relevant product disclosure statement. Any tax information in this presentation refers to current laws, is not based on your unique circumstances and should not be relied on as tax advice.