The Federal Budget dropped on Tuesday, 11 May, with many announced amendments and changes that affected the superannuation and SMSF sectors. Non-concessional contributions increased maximum limits were announced and would come into effect as of 1 July 2021, increasing the cap from $110,000, up from the previous cap of $100,000.

Personal Contributions made into an SMSF from after-tax income on which no tax deduction is claimed, known as Non-Concessional Contributions. Non Concessional Contributions are personal contributions made into your SMSF from your own personal Bank Account and not contributions to your super made by your Employer.

You will be able to put non-concessional contributions into super (including using the bring-forward rule) up until age 74, without there being a need for you to work.

The bring-forward rule is a provision that allows Members of a superannuation fund to make non-concessional contributions that amounted to more than the contributions cap of $100,000 in one year by utilising the cap for the next two years. It has been amended to reflect the Budget’s rulings and come into effect on 1 July 2021.

You will still need to meet the work test if you wish to make tax-deductible contributions. Still, this outcome may provide some excellent planning opportunities for you regarding removing taxes from the death benefits that your adult children will pay on any benefits paid out to them from your superannuation.

As an example, with the increase to the age limits, there are many ways that you can take advantage of this to boost your super. Let’s say that you have extra cash that you would like put into the superannuation system that you weren’t previously able to, such as $100,000 that you wanted to put in when you turned 67 but were unable to because the age limit for non-concessional contributions had been reached.

With the increase, you will be able to put non-concessional contributions into your super up until you reach 74, which could amount to a hefty sum if you contribute the maximum cap limit amount each year.

We can offer you advice on how best to utilise this new non-concessional contributions cap to your advantage and our knowledge of strategies that we can use for non-concessional contributions to potentially save your children tens of thousands of dollars in death benefits taxes (currently taxed at 15%) if you wish to leave any of your super to your adult children.

Speak with us to find out more about the other ways that you can benefit from the newly released Federal Budget’s outcomes and announcements involving superannuation.

There’s been a lot of buzz around superannuation since the 2023-24 Federal Budget was announced. One such buzz involves the concept of ‘payday super’.

Payday super has been introduced by the government to avoid the discrepancies that those in lower-paid, casual and insecure work often encounter with their superannuation compared to others in more secure positions due to less-frequently paid super.

Employers are currently required to pay the superannuation guarantee of 10.5% on top of employee wages every quarter, even if workers are paid more frequently in fortnightly or monthly pay cycles.

The idea behind payday super is that rather than employers pay their employees their superannuation quarterly, they will be expected to pay it to employees when their pay cycles are run (on ‘payday’). This reform is to come into effect from July 2026.

Aligning the payment of superannuation with wages and salaries will increase retirement incomes through greater compounding returns.

For example – a 25-year-old on an average income who currently receives their super quarterly and their wages fortnightly could be up to $6000 or 1.5% better off at retirement.

More frequent super payments could also help employers by making payrolls smoother, with fewer liabilities building up on their books and making it harder for employees to be exploited by disreputable employers.

Unpaid super is a key issue afflicting the current superannuation system, with an estimated $5 billion missing from Australian employees.

Currently, Australian employees are vulnerable to exploitation if their employer fails to make the required superannuation contributions.

These workers often rely on ATO intervention to recover lost super. However, the ATO can only generally recover up to 15% of owed superannuation.

Could This Assist In Bridging The Gender Gap? 

Another issue for which this may lead to some form of amendment is the gender gap in superannuation.

Women are often victims of this exploitation of unpaid or missing super due to gaps in employment that may occur, affecting how their superannuation compounds and/or stagnates. This could be from taking time off work for caregiving reasons, the overall pay from their job, or even just taking maternity leave. Women are also more likely to be employed in certain areas and industry jobs where they are at risk of unpaid super.

It is believed that women will likely earn $135,000 less than their male counterparts over their working lives as a result. Payday super could potentially lead to further action regarding improving the retirement outcomes for women who take time out of the workforce, such as paying super on paid parental leave.

What Risks Are There To My Business?

Some employers may face cashflow issues when paying superannuation at the same time as payroll. However, three years of notice has been given to those who may have these issues to adjust their cashflow practices and make arrangements. To avoid compliance issues with the requirements to be instated in 2026, it’s best to update payroll systems beforehand.

Not sure where to start? Speak with your trusted business adviser today. We’re here to help with the complexities that can arise with payroll.

If you’re a trustee of a self-managed super fund, some reasons or circumstances could have emerged that may result in you wanting to get out of that fund.

These may be personal circumstances (such as a divorce or another trustee dying), financial reasons (investments not performing as they should or you aren’t taking a pension after retiring) or you simply may not have the time to manage it efficiently anymore.

Whatever the reason, getting out of a self-managed super fund is no easy task. An SMSF cannot simply be placed ‘on hold’ as it were, as an SMSF must be completely closed down (unless members are remaining). You cannot simply take your funds out of the SMSF, especially if it is in the name of multiple trustees.

Getting out of your SMSF can be a complex process, with a lot of paperwork and responsibilities you must ensure are met. Failing to meet those responsibilities as a trustee, even when winding up your SMSF, could lead to financial and legal ramifications (such as penalties and fines).

Though some of the steps for winding up an SMSF might be self-explanatory, ensure you cover your bases by ensuring that the following steps are followed.

Consent Of Trustees Must Be Obtained

As with most decisions that are to do with an SMSF, consent from the fund’s trustees must be obtained in writing at a trustee meeting. A resolution that the SMSF is to be wound up is to be made and all trustees need to agree to it. This must be minuted and signed by all trustees.

After this consent is obtained, the Australian Taxation Office (ATO) must be notified of the fund being wound up within 28 days of the decision being made.

Check Your Trust Deed

This may contain instructions or information pertaining to how your SMSF needs to be wound up and the specific steps that need to be taken. Work Out What Will Happen To Member

Benefits

An SMSF can only be closed when there are no funds available, so any existing monies within the account need to be paid out to members who are able to access their super (if they have met a condition of release) or rolled over to another super fund.

You also need to take into consideration events that may affect other members’ transfer balance accounts (which may need to be reported by the SMSF).

Paying Out The Fund to members

If members are still in the accumulation phase, they need to rollover their funds into another super fund. This can be any kind of super fund – such as industry and retail funds – and doesn’t need to be another SMSF. You also need to take into account if any of the assets within the SMSF will incur Capital Gains Tax if they are sold to fund member benefits payouts.

Appoint An Auditor

Appoint an auditor to complete a final audit of the SMSF before you lodge your final tax return. They must be ASIC approved. The audit will help you to finalise the tax obligations of the fund, including CGT and taxable income received by the fund through investment returns or member contributions.

The ATO will then examine the audited accounts and determine whether there are any final tax obligations or refunds due. Any final tax owed can be paid from funds remaining in the SMSF’s accounts.

Approval By The ATO For The Fund To Close

Finally, the ATO will send you a letter stating that your SMSF’s ABN has been cancelled and your SMSF’s record has been closed on the ATO’s system. This letter confirms that you have met all reporting and tax responsibilities, and you can now close the fund’s bank accounts.

Closing an SMSF is a complex task; you should not attempt to do it alone. Please reach out to a licensed adviser if this is something you are contemplating.

It is your responsibility as an employer to set up your business to pay super into your eligible employees’ chosen super funds or their stapled super fund where no choice has been made.

If your employee hasn’t made a choice and doesn’t have a stapled super fund, you can contribute their super to your default super fund.

What you need to do:

• Select your default super fund.
• Offer employees a choice of super fund and keep records that show you’ve done this.
• Request your employee’s stapled super fund details if they do not make a choice
• Provide employees’ TFNs to their funds.
• Set up your systems to pay super contributions electronically to the right fund.

If you pay extra super for an employee:

• under a salary sacrifice agreement, you must set up the arrangement for the employees’ future earnings, document the arrangement and use a complying fund.
• you must report the amounts being made to the employee’s fund.

Salary Sacrifice Agreements

To create an effective salary sacrifice arrangement, you must:

• set up the arrangement for employees’ future earnings
• document the arrangement
• use a complying fund.

Set Up The Arrangement For Employees’ Future Earnings

The arrangement must be set up for your employee’s future earnings. It can’t include previously earned or accrued:

• salary, wages or entitlements
• annual or long service leave.

Document The Arrangement

You and your employee must prepare and sign a document that states the terms of the salary sacrifice arrangement. If you don’t have this documentation, it may be difficult to establish the facts of your arrangement.

Employees can renegotiate the arrangement at any time, within the terms of their employment contract or industrial agreement. If your employee has a renewable contract, you can renegotiate the salary sacrifice amount before the start of each renewal.

Use A Complying Fund

The salary sacrifice amount must be contributed to a complying fund for the period of the arrangement.

Contributions can’t be accessed until the employee satisfies a condition of release, such as reaching retirement age.

Report The Amounts

Reportable employer super contributions (RESC) are not included in your employee’s assessable income. They do not affect the way you calculate super contributions for your employees.

The following employer super contributions are reportable:

• additional contributions as part of an employee’s individual salary package
• additional contributions under a salary sacrifice arrangement
• pre-tax amounts paid to an employee’s super fund at the employee’s direction, such as directing an annual bonus into super.

You must report extra contributions if:

• your employee can influence the rate or amount of super you contribute for them; and
• the contributions are in addition to the compulsory contributions you must make under
  • super guarantee
  • a collectively negotiated industrial agreement
  • the rules of a super fund
  • federal, state or territory law.

The extra contributions are reportable super contributions for employees unless you show that:

• the extra contributions are made for administrative simplicity
• a documented policy is in place that does not allow an employee to influence the contributions you make on their behalf.

Early access to your superannuation is permitted under a few limited circumstances outlined by the ATO. In the case that you are experiencing financial struggle and would like to withdraw from your super, be aware of the particular circumstances that will allow you to do so.

Compassionate grounds:

Withdrawing super on compassionate grounds is permitted in the event that you need money to pay for:

• medical treatment and medical transport for you or your dependant,
• palliative care for your or your dependant,
• making a payment on a home loan or council rates so that you don’t lose your home,
• accommodating a disability for you or your dependant, or
• expenses associated with the death, funeral or burial of your dependant.

Severe financial hardship:

You can also be permitted access to your superannuation due to severe financial hardship. However, when requesting withdrawals under severe financial hardship, individuals need to contact their super provider for access rather than the ATO.

Both of the following conditions must be met for you to be eligible to withdraw some of your super:

• you have received eligible government income support payments continuously for 26 weeks, and
• you are unable to meet reasonable and immediate family living expenses.

Superannuation that is withdrawn due to severe financial hardship is taxed as a super lump sum. You can withdraw up to $10,000 from your superannuation (minimum of $1,000) and in the case that you have less than $1,000 in your super funds, you can withdraw up to your remaining balance after tax.

Terminal medical condition:

You may be eligible to request access to your super (approval by your super fund) in the event that you have a terminal medical condition and all the below conditions are met:

• two registered medical practitioners have certified that you suffer from an illness or injury that is likely to result in death within 24 months of the date of signing the certificate,
• at least one of the two registered medical practitioners is a specialist in the area related to your illness or injury, and
• the 24-month certification period has not ended.

Temporary incapacity:

Those who are temporarily unable to work as a result of physical or mental medical conditions may be eligible for early access to superannuation. Access is dependent on the insurance benefits linked to your super account. Any withdrawals you receive are taxed (with regular rates) as a super income stream.

Permanent incapacity:

Permanent incapacity, also known as disability super benefit, allows for early access to super in the case that a permanent physical or mental condition is likely to stop you from ever working again, in a job you were previously qualified for.

Individuals can choose to receive permanent incapacity super withdrawals as regular payments (income stream) or as a lump sum. Unlike temporary incapacity, permanent incapacity super withdrawals are subject to different tax components, based on:

• the tax-free component of your super funds,
• the taxable component your super provider has paid tax on (tax element), and
• the taxable component your super provider has not paid tax on (untaxed element).

To receive concessional tax treatment, your permanent incapacity must be certified by least two medical practitioners.

Keep in mind that the ATO has also announced a new set of rules for the early release of superannuation due to COVID-19. Individuals who have been adversely affected by the pandemic may be eligible to access some of their superannuation early.