Self-funded retirees have felt like punching bags for the last few years with hit after hit chipping away at their ability to fend for themselves within the rules they had relied upon in making their savings plans over the last 30 years. Combine the changing of goal posts with low interest rates and blue-chip underperformance from the banks, telcos and utilities and they are not to be blamed for thinking a hex had been put on them.

So an SMSF friendly budget is the welcome news coming out of the 2018-19 Federal Budget. With many of us SMSF Specialists and you the SMSF members still working through the wide-reaching and complex superannuation changes which took effect from 1 July 2017, this Federal Budget will provide much needed stability while looking to reduce costs for SMSFs and prove additional flexibility.

The key changes proposed for SMSFs and superannuation are:

Three-yearly audit cycle for some self-managed superannuation funds.

The Government will change the annual SMSF audit requirement to a three yearly requirement for SMSFs with a history of good record keeping and compliance. The measure will start on 1 July 2019 for SMSF trustees that have a history of three consecutive years of clear audit reports and that have lodged the fund’s annual returns in a timely manner.

One concern I have is if trustees make a mistake in year 1 that is not discovered until year 3, will they face 3 years interest charges on the penalties.

Expanding the SMSF member limit from four to six

As already announced, the Federal Government confirmed its decision to expand the number of members allowed in an SMSF from four to six. Expanding the definition of an SMSF to a fund with a maximum of six members will provide greater flexibility in how funds can be structured.

Whilst there are some concerns over making decisions I like this move where as mum and dad in their later years want to reduce their involvement but they want help rather with the fund rather than moving to separate retail funds. It may help prevent elder Financial abuse where instead of one child assuming control of the SMSF, more of the family could be involved. Temptation and inheritance impatience is always there for one person but add a few others in to the decision making and the risk of financial abuse reduces considerably.

Also 6 members of a family small business allows for later drawdown from the parents accounts and recontribution for younger family members to retain business real property in the fund after death of the older generation.

Note; you will need to ensure your trust deed allows more than 4 members and it most likely won’t so you will need to update the trust deed first before accepting new members. READ THE DEED

Over 65, 1 additional year Work test exemption

The Government will provide more time for Australians aged 65 to 74 to boost their retirement savings, by introducing an exemption from the superannuation work test.This exemption will apply where an individual’s total superannuation balance is below $300,000 and will permit voluntary superannuation contributions in the first year that they do not meet the work test requirements.

This is good but limited in its scope as more and More people have reached the $300k level because of Super Guarantee Contributions for most since 1992 or before for some. But it is a female friendly move as they are most likely to have lower balances

Life insurance cover in super to be opt-in for individuals under 25 years of age.

The Government will legislate that life insurance cover in superannuation will be opt-in for those individuals under 25 years of age or with account balances under $6000 to ensure that unnecessary fees do not erode smaller balances.

Life insurance cover will also cease where no contributions have been made for a period of 13 months.

If you have kept a retail or industry fund open with small balances to retain insurances you may need to put a small annual contribution in place (I would recommend $100 per half year just in case) to ensure it does not get tagged as dormant.

Older Australian package

The Government introduced the following measures to enhance the standard of living older Australians:

• Increase to the Pension Work Bonus from $250 to $300 per fortnight.

• Amendments to the pension means test rules to encourage the take up of lifetime retirement income products.

• Expansion of the Pensions Loan Scheme to allow more Australians to use the equity in their homes to increase their incomes.

I think this will be a major bonus for those with a lumpy asset or shareholding’s they wish to retain but need more cashflow. At a current rate of 5.25% the Pensions Loan Scheme is a very decent rate and security that you are borrowing from a bank or predatory lender based on a brokers conflicted commissions.

Personal income tax bracket changes  (take most these with a pinch of salt!)

The Government has provided personal income tax relief to lower and middle income earners. A Low and Middle Income Tax Offset will now be available for individuals with incomes of up to $125,333.

The $87,000 income threshold, above which a 37 per cent tax rate applies, will increase to $90,000.

Other changes

• A surplus of $2.2 billion is expected in 2019-20, one year ahead of schedule.

• The Government’s planned increase in the Medicare levy from 2 per cent to 2.5 per cent, to fund the National Disability Insurance Scheme, will now not go ahead due to increased tax revenues.

How can we help?

Some of these measures may open up strategy options for you and your family.

If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to give me a call or email to arrange a time to meet or talk by phone so that we can discuss your particular requirements in more detail.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.