Superannuation changes

Superannuation is one of the best ways to grow your wealth, as it provides significant tax concessions which are designed to help you save for retirement. In fact, super now accounts for 17% of household assets and this percentage is projected to grow rapidly in the coming decades.

However, on the back of concerns that people’s savings shouldn’t be unnecessarily eroded by fees or inappropriate insurance arrangements, the government has passed a number of new laws that are set to commence from 1 July 2019.

Here’s a breakdown of the most important changes – and what you can do to prepare for them.

Consolidation of inactive low-balance super accounts

If you have a super account that hasn’t received a contribution or rollover for 16 months and has a balance below $6,000, this is classified as an inactive low-balance account. These accounts will be transferred to the Australian Taxation Office (ATO), which will then attempt to auto-consolidate those funds into an active account linked to you. However, your account will not be considered an inactive low-balance account if: you have satisfied an eligible condition of release, or during the previous 16 months, you have chosen to maintain insurance cover; changed investment options; made changes to your insurance cover; made or amended a binding beneficiary nomination; or made a written election to the ATO that you’re not an inactive member.

Your financial adviser can explain more about the benefits of consolidating super accounts, or alternatively, take you through the steps required to keep it ‘active’.

Cancellation of insurance in inactive super accounts

Accounts that have remained inactive for 16 months or more will have their insurance switched off unless you let your fund know (by making a valid election) that you want to keep your insurance cover.

An inactive account for this purpose is one where no contribution or rollover has been received for 16 months or more.

This change is to ensure that inactive accounts won’t be eroded by insurance premiums. This is a positive outcome for those who already have insurance in another account, or outside of super.

It’s important to make sure you have enough personal insurance to cover you if something goes wrong. Speak with your financial adviser to ensure you have the appropriate level of cover.

Abolishment of exit fees

Australians pay on average $68 to leave a super fund. Under the new rules, all super fund exit fees will be banned, which could be another compelling reason to consolidate your super accounts.

Centrelink changes

In addition to these super changes, there are some important Centrelink changes that also come into effect on 1 July 2019:

Work Bonus

The Work Bonus allows most pensioners who’ve reached age pension age to disregard the first $250 per fortnight of their employment income under Centrelink’s income test. From 1 July, this will increase to $300 per fortnight, which also means the maximum unused fortnightly amounts you can accrue will increase to $7,800 per annum, up from $6,500. So you’ll be able to earn more from work before your pension reduces.

Additionally, from 1 July 2019, the Work Bonus will be extended to include eligible earnings from self-employment.

Assessment of lifetime income streams

Lifetme income streams (such as lifetime and deferred annuities) will be assessed differently under the social security income and assets tests if they are purchased on or after 1 July 2019. If you are considering commencing a lifetime income stream, the choice of whether to purchase it before 1 July 2019, or on or after 1 July 2019, could therefore make a big difference to your level of social security entitlement. Your financial adviser can explain more about the changes and how they could impact your financial situation.

Get the right advice

The changes to super and Centrelink rules will affect people in different ways. So before you make any decisions about your financial strategy, talk to your financial adviser. They can provide more information and give you the guidance you need to make the right decisions about your finances.

Important information

This document contains general advice. It does not take into account of your objectives, financial situation or needs. You should consider talking to a Financial Adviser before making a financial decision. This document has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. ‘Count’ and Count Wealth Accountants are trading names of Count. Count Financial Advisers are authorised representatives if Count. Information in this document is based on current regulatory requirements and laws, as at 30 April 2019, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.