2020 Federal Budget recap

• To assist in reducing the number of multiple super accounts in the system, and better protect people’s retirement savings from the costs of having unintended multiple accounts, the Government proposes that from 1 July 2021, when a person changes jobs, their super account will be ‘stapled’ automatically to them. At the time of starting a new job, and unless a member decides otherwise, their employer will pay superannuation contributions into their existing ‘stapled’ fund.
• If an employee does not have an existing superannuation account (e.g. is new to the workforce) and does not make a decision regarding a fund, the employer will pay the employee’s superannuation into the employer’s nominated default superannuation fund. This will then become their stapled fund and will continue to be their super fund, even if they change jobs, unless they elect to choose an alternative new fund.

• By 1 July 2021, the Government will develop a new interactive online ‘YourSuper’ comparison tool, which will be administered by the ATO, to allow people to research and select a MySuper fund to manage their super savings.
• Members will be able to look up and compare the performance and fees of all MySuper products in a single place, with underperforming products clearly marked.
• The YourSuper comparison tool will be based on information that super funds report to the industry regulator, APRA, with information about product performance updated quarterly.

• The Government proposes that to assist fund members maximise their retirement savings by  protecting their accounts from underperforming funds, MySuper products and other trustee-directed superannuation products will be subject to an annual objective performance test, based on net investment returns.
• A fund determined to be underperforming will be required to notify its members of this assessment and provide them with information and the tools to switch to a better performing fund.
• Underperforming funds will also be listed on the YourSuper comparison tool until their performance improves. The YourSuper tool will also assist members understand and compare fees and returns across various super funds to assist them in determining if their current fund is appropriately performing and delivering value.

• The Government intends to strengthen superannuation’s sole purpose test to ensure super funds and their trustees act in the best financial interests of their members.
• In strengthening the duty owed by trustees, they will need to establish that there was a reasonable basis for expenditures, outlays and related actions being consistent with members’ best financial interests.
• The Government will also require super funds to provide their members with more and enhanced information regarding how the fund is managed.  
• Super funds are now required to hold Annual Members’ Meetings annually. These meetings allow the trustee to explain how the fund has performed in the last financial year and answer any questions that members have. From 1 July 2021, funds will be required to provide certain information to their members in advance of the Annual Members’ Meeting. This will include, amongst other material:
• the Fund’s annual report and outcomes assessment
• a copy of the member’s most recent fund statement
• details of any Significant Event Notices issued during the last year; and
• details of certain fund expenditures, related to marketing and promoting the fund, any donations made, or payments to industry bodies or trade associations.

• Aged pensioners and others on Government support may be eligible to receive two additional tax-free payments of $250. This follows $750 payments already made in April and July this year. These payments will be paid in November 2020, followed by a second instalment in March 2021.
• The reduction in the minimum annual drawdown amounts for account-based pensions was reconfirmed, with no reference to there being a further extension beyond the existing two-year period 2019-2021.
• The deferral of the start date for the increase, from four to six, in the maximum number of members in SMSFs and small APRA funds from 1 July 2019 to the date of Royal Assent of the enabling legislation was confirmed.
• The Government has committed to invest an additional $14 billion in new and accelerated infrastructure projects over the next four years. These projects will support a further 40,000 jobs during their construction.
• Businesses with turnover of less than $5 billion can write off the full value of eligible assets in the first year they are used or installed, until 30 June 2022.
• Companies with turnover of less than $5 billion can carry back losses incurred in the 2019-20 to 2021-22 years.
• A new JobMaker measure incentivises employers to hire young workers.

The Government intends to bring forward Stage Two of its already legislated personal income tax cuts which will now commence from 1 July 2020 instead of the original start date of 1 July 2022. As a result, the higher income level to which the 19% tax bracket applies will be increased from $37,000 to $45,000 from 1 July 2020.

The proposed changes will also mean that from 1 July 2020 more individual taxpayers will be subject to a marginal tax rate of no more than 32.5%. The largest benefits of this round of tax cuts will flow to middle income earners, particularly those earning more than $120,000.

While the Low- and Middle-Income Tax Offset (LMITO) was due to be removed with commencement of Stage Two of the Personal Income Tax Plan from 1 July 2022, it will continue as a one-off additional benefit during the 2020-21 tax year.

The government announced the lowering of personal income taxes consistent with their 2018-19 plan. The table below provides a summary of the income tax rates.

It’s important to note that with the back-dating of the tax cuts to 1 July 2020, this means that most individuals will only receive the full benefit of the reduced income tax on your earnings once you lodge your 2021 income tax returns after June next year.