Protecting super and new flexibility with SMSFs
Several measures have been proposed, which are essentially designed to protect superannuation balances against erosion by fees, and which also introduce flexibility in the way that self-managed superannuation funds (SMSFs) can be used by larger groups of individuals. The measures provide initiatives which should benefit individuals in various ways.
Capping passive fees, banning exit fees and reuniting small and inactive superannuation accounts
From 1 July 2019, it is proposed that a 3% annual cap will be introduced on passive fees charged by superannuation providers (ie. industry, retail, corporate and government funds), where the individual’s account balance in that fund is below $6,000. In addition, the imposition of exit fees by any type of superannuation fund will be prohibited from the same date onwards.
There is a further proposal that all inactive superannuation accounts with balances of less than $6,000 must be transferred to the ATO. From there, the ATO will expand its data-matching processes to attempt to reunite these inactive accounts with any active accounts of the relevant members.
Although these proposals may have a positive impact on protecting superannuation savings from erosion by fees, it will be of interest to determine how the reunification of lost and inactive accounts will be achieved in practice.
Increasing the number of members of private superannuation funds and preventing inadvertent contribution breaches
From 1 July 2019, it is proposed that all SMSFs and small APRA funds will be allowed to have a maximum of six members, being an increase from the current limit of four individuals.
It is also proposed that any individuals whose income exceeds $263,157 per annum, and who have multiple employers, will be able to nominate that their wages from specified employers are not subject to the superannuation guarantee. This measure would apply from 1 July 2018, and is aimed at ensuring that unintentional breaches of the $25,000 annual concessional contributions cap do not occur (resulting in excess contributions tax), in circumstances where there are multiple obligations to make compulsory superanuation guarantee contributions.
Allowing up to six members of private superannuation funds provides greater flexibility in numerous family situations, and eliminates the additional costs of forming and operating more than one fund. The proposal to allow certain wages to be exempt from superannuation guarantee is welcome and will assist many in certain industries (eg. locum medical practitioners), and has been sought by the industry for some time.