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Proposed superannuation changes from the May 2018 Federal Budget

The following is a summary of the superannuation changes proposed in the May 2018 Federal Budget*

The key superannuation measures announced in the 2018/19 Federal Budget included:

  • measures to tackle multiple superannuation accounts,
  • changes to insurance for younger and inactive members,
  • restrictions on superannuation fees.

This is a summary of the super and pension measures:

  • Auto-consolidation of multiple accounts
  • Abolish exit fees on all super accounts
  • 3% cap on administration and exit fees for accounts less than $6000
  • Proposal to remove default insurance for Under 25s or low balances and inactive
  • Pensions home equity scheme
  • Pension Work Bonus
  • Allowing retirees to make voluntary contributions in the first year of retirement
  • Developing framework for Comprehensive Income Retirement Products

Here’s more information about each of these:

Auto-consolidation of multiple accounts

The Government announced proposals to tackle multiple superannuation accounts. Under the proposals, all super accounts that have not received a contribution for 13 months, with balances below $6,000, will be classified as inactive and transferred to the ATO.

The ATO will be given powers to use data matching to automatically consolidate these accounts with members’ active accounts.

The Government expects the new system will reunite $6 billion of superannuation with to 3 million members’ active accounts in 2019-20.


The Government has proposed measures to tackle the impact of superannuation fees on member balances. The proposed measures are:

  • A cap on administration and investment fees on accounts with balances less than $6,000 at 3 per cent
  • Abolishing all superannuation fund exit fees.

Insurance in Superannuation

The Government will consult on proposals to abolish default insurance cover within superannuation for young people under 25, those with balances of less than $6,000 and inactive accounts that have not received a contribution for 13 months.

These proposals would protect the superannuation balances of these members from being eroded by insurance premiums, but leave many younger and low balance members, including blue collar workers in hazardous jobs, without life insurance cover. The proposals may lead to higher insurance premiums.

Encouraging retired home owners to use home equity to fund their retirement

The Pension Loans Scheme is a reverse-mortgage style scheme that enables retirees to release equity in their home in the form of an income stream. Centrelink administers the Scheme. The Scheme is currently only open to retirees who are eligible for a part Age Pension and is not widely used. The Government has proposed to extend the Scheme to all retirees, including full rate Age Pensioners and self-funded retirees.

This will enable single retirees who own their own home to boost their income by up to $11,799 and couples to boost their retirement income by up to $17,800 without impacting their eligibility for the Age Pension or other benefits.

Encouraging retirees to work more

The Pension Work Bonus allows pensioners to earn up to $250 each fortnight without reducing their Age Pension. It will be expanded to allow pensioners to earn an extra $50 a fortnight ($1,300 a year) without reducing their pension payments.

The Pension Work Bonus will also be expanded to self-employed people who will be able to earn up to $7,800 a year.

The Government expects 88,000 people to take up the option to work more as a result of these changes.

Allowing retirees to make voluntary contributions in the first year of retirement

Retirees aged between 65 and 74 with a superannuation balance below $300,000 will be allowed to make voluntary super contributions for the first year that they no longer meet the work test requirements.

Comprehensive income products for retirement

The Government has proposed introducing a retirement income covenant requiring superannuation trustees to formulate a retirement strategy. It will require trustees to offer Comprehensive Income Products for Retirement.

The Government will release a position paper outlining its proposed approach to the covenant shortly.
Providers of retirement income products will also be required to report simplified, standardized metrics in product disclosure to assist consumer decision making.

From 1 July 2019 new Age Pension means testing rules will be introduced for pooled lifetime income streams. The rules will assess a fixed 60 per cent of all pooled lifetime product payments as income, and 60 per cent of the purchase price of the product as assets until 84, or a minimum of 5 years, and then 30 per cent for the rest of the person’s life.

You may need advice

If you need more information or help understanding what these changes mean, call us on 1800 680 627. Should you need personal financial advice, we can refer you to Club Plus Financial Planning for a free initial consultation.

*The above information is from the Special Federal Budget Edition released by the Australian Institute of Superannuation Trustees (AIST) dated 9 May 2018.

Any advice provided above is of a general nature only and does not take into account your specific objectives, financial situation or needs. Issued by Club Plus Superannuation Pty Limited – ABN 26 003 217 990, RSE License Number: L0000529, AFSL Number: 245362, the trustee of the Club Plus Superannuation Scheme ABN 95 275 115 088.

Note: Financial advice is available through Club Plus Financial Planning Pty Ltd (Club Plus Financial Planning), ABN 14 143 636 766, who is a Corporate Authorised Representative #367058 of Adviser Network Pty Ltd, ABN 25 056 310 699 (“Licensee”). The Licensee holds a current Australian Financial Services Licence #232729 and is responsible for the financial services provided to you. All Club Plus Financial Planning’s financial advisers are sub authorised representatives of the Licensee.