An SMSF friendly budget is the good news coming out of the 2018-19 Federal Budget. With SMSF members still working through the wide-reaching and complex superannuation changes which took effect from 1 July 2017, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility.
The key changes proposed for SMSFs and superannuation are:
Reduction in audit cycle for SMSF’s
The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.
Increasing maximum number of SMSF members
As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured.
Removing the work test for recent retirees
The ‘work test’ requires individuals who are over 65 to work a minimum of 40 hours in a 30-day period during the financial year. This is so they can contribute to super.
From 1 July 2019, individuals aged between 65 and 74, with a superannuation balance of less than $300k, can make a voluntary contribution in the first year that the individual fails the work test (i.e. the year they retire).
Crackdown on personal super contributions
From 1 July 2018, the Government will be providing the ATO resources to crackdown on individuals who have claimed personal super contribution tax deductions but have failed to submit a ‘notice of intent’ to their super fund.
Life insurance cover in super to be opt-in for individuals under 25 years of age
The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances. Life insurance cover will also cease where no contributions have been made for a period of 13 months.