Budget 2011 - Key Superannuation measures

Last night the Gillard Government handed down its first Federal Budget and as expected superannuation was mainly left alone. The only measures announced were clarification of previous announcements or mechanisms to address current issues & Cooper review outcomes.

These included:

• 2011-12 will be the last year of a reduction for minimum pension drawdown rates with a lower reduction of only 25%. This means that the Government has determined that by 30 June 2012 the financial markets will have sufficiently recovered to near their pre GFC positions and that the necessity to re-build capital by smaller pension payments will have passed.
• Refunding excess concessional contributions for 2011-12 and later years. As an alternative to paying excess contributions tax, the first time a person breaches the cap (ignorance is only an excuse once!!) they will have the option of receiving a refund (up to $10,000) with it being assessable income in the investor’s hands (on top of the super 15% tax but not penalty tax on the earnings on the excess amount). Of course this refund would mean the excess would now not count towards the non-concessional cap and reduce the likelihood of the non-concessional cap being breached to the excess concessional contribution. Of course if the person will not breach the non-concessional cap they may not wish the refund as the excess tax rate of 31% may be lower than their marginal rate.
• To enhance Superannuation Guarantee compliance, additional reporting obligations will be imposed on both employers and superannuation funds. The requirement to be able to monitor & potentially report on contributions quarterly may become a mandatory ability for any superannuation fund under the Choice of Fund regime. If this capacity cannot be demonstrated then the employer will not pay SG contributions to the SMSF. This will have significant fallout on the way in which SMSF are administered to meet this obligation.
• Clarification to changes to the concessional contribution cap post 1 July 2012 for over age 50s. We now know that the over age 50 cap will always be $25,000 more than the under age 50 cap. This will mean that over time the relative cap between the two age limits will decline as the cap increase. We are still awaiting clarification on the more important matters, namely what amounts count to calculate the $500,000 balance threshold and at what date these calculations are done.
• The Government co-contribution thresholds will remain un-indexed for another year through 2012-13 at $31,920 and $61,920. The maximum amount of the co-contribution is still being maintained at $1,000 per annum.
• Fixing the small anomaly in SIS which allowed for parents & guardians to act as a SMSF trustee for a minor member where there was no Legal Personal Representative for individual trustees but only permitted the Legal Personal Representative appointment as directors of a corporate SMSF trustee for a person under a legal disability. As minors cannot appoint Legal Personal Representatives under powers of attorney this needed to be addressed to allow for corporate SMSF trustees with minor age members.
• Additional funding to Regulators to deal with Cooper response requirements financed by increasing super fund levies. APRA ($26.2 million over 4 years) & ASIC ($3.7 million over 4 years) will provide activities related to MySuper financed by increasing the APRA fund levy. The ATO ($40.2 million over 5 years) & ASIC ($8.4 million over 4 years) will undertake increased SMSF activities funded by a $30 ($47million over 4 years) increase in supervisory levy from 2010-11 year and an unknown SMSF auditor registration fee from 1 July 2012 ($1.8 million over 4 years). APRA levies are reviewed every year but the SMSF levy has not changed since 2007-08 when it increased from $45 to $150.