23rd Jul, 2023
Retirees who draw an account-based pension from their super need to be aware that the 50% reduction in
the minimum pension drawdown rate for superannuation and annuities which applied for previous years will no longer apply from 1 July 2023.
This temporary measure was introduced by the previous Federal Government as part of its response to the COVID-19 pandemic, which was negatively impacting super and pension/annuity balances.
Most income streams paid from a super account held in an individual member’s name are account-based pensions. These pensions are required to meet minimum standards, including not being able to increase the capital supporting the pension using contributions or rollover amounts once the pension has commenced, and paying a minimum amount at least once a year.
In general, minimum payments need to be made at least once a year and are determined by the age of the beneficiary and the value of the account balance as at 1 July each year. For example, people aged between 65 and 74 will need to apply a 5% standard percentage factor to work out the minimum pension amount for 2023–2024.
While the minimum annual payments are mandated, there are no maximum annual payments, except for transition to retirement pensions which have a maximum annual payment limit of 10% of the account balance at the start of each financial year. This means that retirees can draw a pension above the minimum pension payment amount, which may be especially welcome given the current cost of living pressures.
22nd May, 2023
In February 2022, the High Court handed down a landmark decision in ZG Operations v Jamsek, which clarified the test for determining whether a worker is an employee or an independent contractor.
The High Court remitted the question of whether the workers were “employees” under the extended definition of that term in s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (the SGA Act) back to the Full Federal Court.
In deciding that the relevant workers were not “employees” under the extended definition in s 12(3), the Full Federal Court determined that s 12(3) does not apply to an independent contractor relationship where the worker uses a company, trust or other service vehicle to contract with the putative employer instead of doing so in their personal capacity. This confirms the ATO’s guidance in Superannuation Guarantee Ruling SGR 2005/1.
Additionally, in determining whether a worker is an “employee” under the extended definition in s 12(3), the Full Federal Court has confirmed that a worker will not be taken to work under a contract that is “wholly or principally for [their] labour” in the following circumstances.
|The contract is for labour and non-labour (eg the provision of substantial capital assets or the assumption of risk) components, and based on a quantitative valuation, the non-labour components predominate.||In many independent contractor relationships, the contractor may be required to provide their own tools and equipment. Whether the contract is principally for labour or alternatively the provision of capital assets and the assumption of material risks is likely to turn on a valuation of the labour and non-labour components respectively.|
|The worker has the ability to delegate the performance of work under the contract to other persons.||The party that bears the onus of proof will need to substantiate the value of the labour and non- labour components through evidence.|
|The worker is engaged under a contract for a “result”.||This finding is consistent with previous case law and ATO guidance. The workers had a contractual right of delegation in this case.|
Employers are required to provide their employees with a minimum level of superannuation support (currently 10.5%) each quarter, otherwise the employer will become liable to pay the superannuation guarantee charge. An “employee” for these purposes includes an employee at common law.
The SGA Act also includes a number of provisions which extend the meaning of “employee”. Relevantly, s 12(3) of the SGA extends the meaning of “employee”, so that: “If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.”
This provision is broad and captures many independent contractor relationships. An entity that engages an independent contractor under a contract of this nature is required to provide the contractor with superannuation support (otherwise they will become liable to pay the superannuation guarantee charge).
11th Apr, 2023
The ATO has recently reported there is now $16 billion in lost and unclaimed super across Australia, and is urging Australians to check their MyGov account to see if some of the money is theirs.
Super becomes “lost super” when it’s still held by the fund but the member is uncontactable or the account is inactive. All lost member accounts with balances of $6,000 or less are transferred to the ATO, which means the ATO is holding large sums of money waiting for people to claim it.
Super providers are also required to report and pay unclaimed super to be held by the ATO once the money meets certain criteria.
Deputy Commissioner Emma Rosenzweig said finding your lost or unclaimed super is easy and can be done in a matter of minutes.
“People often lose contact with their super funds when they change jobs, move house, or simply forget to update their details. This doesn’t mean your super is lost forever – far from it. By accessing ATO online services through myGov, you can easily find your lost or unclaimed super.”
While the ATO says it’s doing all it can to get this money back where it belongs, this relies on people keeping their contact information up to date. The best thing you can do to ensure you’re getting what you’re entitled to is check that your super fund and MyGov account have your current contact information and correct bank account details.
Almost one in four Australians also hold two or more super accounts, which can contribute to forgetting about or losing super. If you’ve unknowingly got multiple accounts, you could be losing hundreds of dollars a year to fees and duplicated insurance costs. If you’re unsure whether to consolidate your accounts, check with your super funds, which can advise if there are any exit fees and whether you’ll lose any valuable insurance.
20th May, 2021
The superannuation contributions work test exemption will be repealed for voluntary non-concessional and salary sacrificed contributions for those aged 67 to 74 from 1 July 2022.
As a result, individuals under age 75 will be allowed to make or receive non-concessional (including under the bring-forward rule) or salary sacrifice contributions from 1 July 2022 without meeting the work test, subject to existing contribution caps. However, individuals aged 67 to 74 years will still have to meet the work test to make personal deductible contributions.
Currently, individuals aged 67 to 74 years can only make voluntary contributions (both concessional and non-concessional), or receive contributions from their spouse, if they work at least 40 hours in any 30-day period in the financial year in which the contributions are made (the “work test”). The work test age threshold previously increased from 65 to 67 from 1 July 2020 as part of the 2019–2020 Budget.
Non-concessional contributions and bring-forward
The Government confirmed that individuals under age 75 will be able to access the non-concessional bring forward arrangement (ie three times the annual non-concessional cap over three years), subject to meeting the relevant eligibility criteria. However, we note that the Government is still yet to legislate its 2019–2020 Budget proposal to extend the bring-forward age limit so that anyone under age 67 can access the bring-forward rule from 1 July 2020. The proposed legislation for the 2019–2020 Budget measure is yet to be passed by the Senate.
The Government also noted that the existing restriction on non-concessional contributions will continue to apply for people with total superannuation balances above $1.6 million ($1.7 million from 2021–2022).
30th Apr, 2021
Having insurance through superannuation can be a tax-effective and cost-effective way of protecting yourself and your loved ones. Most funds offer three different types of insurance through super, each covering different contingencies: life insurance, total and permanent disability (TPD) insurance and income protection insurance.
Life cover pays a lump sum or income stream to your beneficiaries when you die, or if you are diagnosed with a terminal illness. TPD insurance pays a benefit if you become permanently or seriously disabled and are unlikely to work again. Income protection insurance pays you a regular income for a specified period if you can’t work due to temporary disability or illness.
It’s estimated that around 70% of Australians who have life insurance hold it through their super fund. However, the Australian Prudential Regulation Authority (APRA) has noted new and concerning developments that may see the costs of this insurance go up.
According to the data APRA has collected on life insurance claims and dispute statistics, premiums per insured member within super funds escalated during 2019 and 2020. APRA has likened this trend to what occurred between 2012 and 2016 when, after a period of significant premium reductions, insurers experienced significant losses. This led to large premium increases and more restrictive cover terms for insurance holders.
APRA notes that should this trend continue, super members are likely to be adversely affected by further substantial increases in insurance premiums and/or reductions in the value and quality of life insurance in superannuation. The regulator goes as far as saying that the ongoing viability and availability of life insurance through super may be at risk, which will impact a large proportion of the population.
It’s not time to panic just yet, but it’s important to regularly review what insurance you actually need, what cover you have through your super, and what you’re paying for it, as premiums can add up and erode your super – especially if you’re unnecessarily paying them to multiple funds!
For now, APRA is continuing to monitor the situation to ensure that registrable superannuation entity (RSE) licensees take appropriate steps to safeguard pricing, value and benefits for members that adequately reflect the underlying risks and expected experience.
17th Oct, 2020
With recent changes to Australia’s superannuation law, the “choice of super fund” regime now extends to employees covered by enterprise agreements and workplace determinations made from 1 January 2021.
Federal Treasurer Josh Frydenberg has said this will allow another 800,000 people to make choices about where their super guarantee contributions are invested, representing around 40% of all employees covered by a current enterprise agreement. The measure was originally announced as part of the Government’s response to the Murray Financial Services Inquiry (FSI) in October 2015.