Some significant changes to Superannuation rules came into play on July 1. Here’s a rundown of those changes, how they may affect you and the action you need to take to avoid being caught out.
If your superannuation fund has not received any contributions for a continuous period of 16 months, regardless of the balance, then the default insurance cover held within that fund will be cancelled. This might be the case if, for example, you’ve taken a break from the workforce, have been travelling overseas for long stretches of time, you’re recovering from major illness or are self-employed & making irregular payments.
To avoid the cover being cancelled, you need to contact your inactive super fund and elect to “Opt-In” to retain the default insurances. Most funds have a link to ‘Opt in’ from their website. Note that the premiums for the insurances are drawn from the super balance, so you may also need to top the fund up to cover any premiums.
If you do have fully-underwritten cover outside of this inactive fund in another fund, or separate to super, then you may not need to do anything. It’s really important to check though – you don’t want to be caught out without cover!
Other changes to Super rules include the following:
- No more exit fees: Exit fees will be banned so you don’t have to pay a penalty when you move from one fund to another.
- Account closure: If you have an inactive account with a balance under $6000, your super account could be closed automatically. The balance will be transferred to the tax office, which will then use data-matching technology to combine the balance with your active super account (if you have one).
- Low balance fee cap: Fees charged on super accounts with a balance of $6000 or less are now capped at 3% per annum.
- No work test: New retirees aged between 65 and 74 can make voluntary contributions into their super without needing to satisfy the work test. To qualify you must have had less than $300,000 in your super account at the end of the previous financial year. The work test must be met in subsequent years.
- Rise in Age Pension work bonus: If you receive the age pension and are still working, you could be entitled to the Work Bonus, which excludes some of your pay from Centrelink’s income test.
- Expanded pension loans scheme: This scheme provides loans to asset rich, cash poor pensioners who own real estate in Australia. It allows them to unlock money tied up in their homes to help pay for day-to-day expenses through a reverse mortgage. It can help with unexpected medical bills or bridging aged-care costs until the family home is sold.
- Concessional cap contributions: You can now make additional catch-up concessional contributions to your super. You do this by using your unused concessional contributions cap amounts from previous years. To qualify, you must have less than $500,000 on June 30 of the previous financial year and not have used your entire $25,000 annual concessional contributions cap in the previous financial year. You can carry-forward up to five years of unused caps in a later financial year, but the rolled forward amounts expire after five years.
If you’re unsure about how super changes will affect you and would like help unravelling it, please call us on 9887 8751 to organise an urgent review or book a meeting online.