• Individuals, Tax Cuts and Superannuation

More tinkering with superannuation

A range of changes to the superannuation system applying to individuals have been announced in this year’s Budget.

Changes to the work test

The Government has proposed to allow for some individuals between the age of 64-75, to make voluntary contributions without passing the work test requirements.
Currently, members between the age of 65-74 must work at least 40 hours in a 30-day consecutive period in the financial year they wish to make a voluntary contribution. The proposed legislation will allow members aged between 65-74 to make voluntary contributions in their first year of retirement, provided they have a total superannuation balance of less than $300,000.

Some of our senior population will benefit from this proposal with the ability to top up their superannuation balances one last time, and gain a tax benefit through the ability to claim a tax deduction in their personal tax returns for concessional contributed amounts.

BDO Comment

For some time, BDO has encouraged the abolition of the work test. Whilst there is little more freedom in these proposed measures, we believe the restrictions are too onerous and this will result in more administration complexity and cost for Australians.

Personal deductible contributions integrity measure

The Government is proposing to improve their ability to capture information for members claiming personal tax deductions for concessional contributions.

The proposed measure has been introduced to ensure that the required tax is being paid on personal concessional contributions, where the individual’s tax return does not mirror the superannuation fund data. The proposed legislation will require individuals to declare that they have complied with the requirements to submit a ’notice of intent’ (NOI) in their individual income tax returns.    

Currently, where individuals intend to claim a personal deduction for super contributions, a NOI form is required to be sent to the Fund and a written response sent back to the member from the Fund.

The proposed legislation indicates that the NOI form will still be required. This change will not provide any administration ease for members, but will educate them as to the requirements of claiming a deduction for a contribution.

BDO Comment

Given the ATO’s access to real time data and ability to data match, BDO is surprised that the ATO is still relying on a manual process when the individual’s tax return is lodged.  

SMSF Audits

From 1 July 2019, some self-managed superannuation funds (SMSFs) will only be required to have an independent audit conducted on their fund’s financial statements and the fund’s compliance with the supervisory legislation every three years. It is proposed that this requirement will apply to SMSFs with a history of three consecutive years of unqualified audit reports and that have lodged the fund’s annual returns in a timely manner.

BDO Comment

While encouraging red tape reductions, BDO is concerned that reducing audit requirements from annual to every three years could result in an increase of inadvertent and unrecognized SMSF non-compliance. This could ultimately lead to increased costs for SMSFs to rectify longer outstanding non-compliance matters.