Key superannuation and funds management announcements include:

  • people with income of more than $263,157 who have multiple employers will, from 1 July 2018, be able to designate that their wages from certain employers are not subject to the superannuation guarantee – this will enable them to avoid inadvertently breaching the $25,000 contribution cap
  • as recommended by the 2014 Financial System Inquiry, a "retirement income covenant" will be introduced (via the Superannuation Industry (Supervision) Act 1993), under which superannuation fund trustees will be required to develop a strategy to help members achieve their retirement income objectives and offer "comprehensive income products". There is currently no such requirement
  • self-managed superannuation funds and small APRA-regulated funds will be able to have six members from 1 July 2019, up from the current maximum limit of four
  • the 50% discount for capital gains on assets held in a managed investment trust ( MIT) or attribution management investment trust (AMIT) for more than 12 months will be removed at the trust level. Beneficiaries will need to determine their own entitlements to CGT discounts when receiving capital gains distributions from a MIT or AMIT.

'Opt-in' insurance only for young members and members with low or inactive accounts

Insurance within superannuation will move from default (or automatic) cover to 'opt-in' cover for:

  • members with balances of less than $6,000
  • members under 25
  • members whose accounts have not received a contribution in 13 months and are inactive.

The Government proposes that the changes will take effect on 1 July 2019. Affected members will have 14 months to decide whether to opt-in to the existing cover or allow it to 'switch off'.

The measure is designed to protect retirement savings from undue erosion and ultimately increase Australians' superannuation balances.

However, Trustees may need to consider ways to mitigate against the potential unintended flow-on effects of these measures – including on premiums and cover available to other member cohorts under group policies where the proportion of lower risk insured members may decrease.

'Work test' exemption for recent retirees

People aged 65-74 with superannuation balances less than $300,000 will be exempt from the work test for voluntary contributions in the first year that they do not meet the work test requirements.

This is designed to give recent retirees additional flexibility to 'get their financial affairs in order' in the transition to retirement.

The work test currently restricts the ability to make voluntary superannuation contributions for those aged 65-74 to individuals who self-report as working a minimum 40 hours in any 30 day period in the financial year.

The Government proposes the measure will take effect from 1 July 2019.

Ban on exit fees and cap on 'passive' fees

A ban will be introduced on exit fees on all superannuation accounts, together with a 3% annual cap on passive fees charged by superannuation funds on accounts with balances below $6,000.

There is already a legislative requirement that buy-sell spreads, switching fees and exit fees be charged on a cost recovery basis only. Presumably the intention is that for exit fees, this restriction will be replaced with a blanket prohibition.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.