The 2020 Federal Budget has been announced, and with it a series of changes that may come as some relief to Australians coping with the financial impacts of COVID-19.
Among these include the Government bringing forward the second stage of tax cuts, which will see the 19% threshold rising from $37,000 to $45,000. The 32.5% threshold will also be increased from $90,000 to $120,000.
To support small business, the Government is also providing a temporary tax incentive available to over 3.5 million businesses - from October 6 until 30 June 2022, businesses with turnover of up to $5 billion will be able to deduct the full cost of eligible depreciable assets of any value in the year they're installed.
Regarding super, although there were no further increases to the superannuation guarantee, there were still major changes announced. As Treasurer Josh Frydenberg explained, "New super accounts will no longer be automatically created every time a worker changes jobs. Under our reforms, your super will follow you."
What this means is that when someone starts working, they will choose a super fund and that fund will follow them through their working lives unless they elect to switch to a new one. To assist with this, the ATO is setting up a "Your Super" portal which contains a list of super funds new workers can join.
Perhaps more controversial has been the announcement that APRA will commence benchmarking super funds by net performance; those who underperform for two years in a row will be unable to accept new members. This measure will apply for default MySuper funds from July 2021 and all other super funds from July 2022. On top of this, the Government said it will increase scrutiny on super trustees so as to "ensure their actions are consistent with members’ retirement savings being maximised."
The CEO of the Association of Superannuation Funds of Australia, Martin Fahy, argued that the super reforms, while beneficial to members in theory, lack sufficient detail as to their practical implications.
"We don’t suffer from a shortage of good funds," Fahy said, "and we need to ensure that these measures don’t reduce competitive intensity or damage the nation building role of superannuation."
He added: "In the absence of the release of the Retirement Income Review and the lack of specificity in the Budget papers, it is unclear how the changes will work in practice or what the implications will be for competition, efficiency and incumbents in the sector."
The CEO of the Australian Institute of Superannuation Trustees, Eva Scheerlink, also noted the lack of attention paid to retirement outcomes for vulnerable Australians. This category included women, who, as HESTA chief experience officer Lisa Samuels explains in the latest season of After Hours, are currently a "blind spot" in the super system.
Notably absent from any of the big-ticket Budget items, though, were any provisions for the advice industry or advice affordability. While Association of Financial Advisers CEO Philip Kewin said he welcomed the Your Super measures and tax cuts, he criticised the Government for not addressing access to financial advice.
"In the middle of the COVID-19 crisis and the worst recession in a century," Kewin explained, "Australians really need financial advice and we would therefore have liked to have seen measures that reduce the cost and improve access to financial advice."
Kewin continued: "People with access to financial advice make better financial decisions and have a better future and clearly that is what Australians need right now. Financial advice will help drive the economy forward.
"The pandemic has been very tough on self-funded retirees and our community of financial advisers has worked hard to help these people, many of whom have experienced a significant decline in investment income and investment values. We would have liked to have seen self-funded retirees given some help that would allow them to better navigate the ongoing crisis.”
Financial Planning Association CEO Dante De Gori was more positive about the Budget, though, particularly as they pertained to superannuation.
"While we are yet to see the finer details of how the super reforms will play out, the FPA welcomes the government’s efforts to hold the right people accountable for fees and costs to ensure the best interests of super fund members are upheld.
"This means those which fail to produce good returns for members will be publicly listed as an underperforming fund."
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