Federal Budget 2020
SOCIAL SECURITY
$250 cash payments for income support recipients
The Government will pay two $250 economic support payments for eligible income support recipients and concession card holders. The payments will be made from November 2020 and early 2021 to eligible income support recipients and concession card holders, including:
• Age Pension;
• Disability Support Pension;
• Carer Payment;
• Family Tax Benefit, including Double Orphan Pension (not in receipt of a primary income support payment);
• Carer Allowance (not in receipt of a primary income support payment);
• Pensioner Concession Card (PCC) holders (not in receipt of a primary income support payment);
• Commonwealth Seniors Health Card holders; and
• eligible Veterans’ Affairs payment recipients and concession card holders.
The $250 cash payments are tax exempt and will not count as income support for social security purposes. These cash payments follow the two $750 stimulus payments in April and July 2020 for social security and veteran income support recipients and concession card holders.
Paid Parental Leave: alternative work test
The Government announced in the Budget that it is also supporting new parents whose employment was interrupted by the COVID-19 pandemic by introducing an alternative Paid Parental Leave work test period for a limited time.
Under normal circumstances, parents must have worked 10 of the 13 months prior to the birth or adoption of their child to qualify, but that is being temporarily extended to 10 months out of the 20 months for births and adoptions that occur between 22 March 2020 and 31 March 2021. This measure is estimated to allow about 9,000 mothers to regain eligibility for Parental Leave Pay and allow a further 3,500 people to claim Dad and Partner Pay.
SUPERANNUATION
Super reforms: accounts to be stapled to members; best financial interests duty; other
The Government will provide $159.6 million to implement reforms to superannuation to improve outcomes for super fund members.
The Your Future, Your Super package, which will seek to reduce the number of duplicate accounts held by employees as a result of changes in employment and prevent new members joining underperforming funds, includes:
• YourSuper portal – the ATO will develop systems so that new employees will be able to select a superannuation product from a table of MySuper products through the YourSuper portal;
• stapled accounts – an existing superannuation account will be “stapled” to a member to avoid the creation of a new account when that person changes their employment. Future enhancements will enable payroll software developers to build systems to simplify the process of selecting a superannuation product for both employees and employers through automated provision of information to employers;
• MySuper benchmarking – from July 2021, APRA will conduct benchmarking tests on the net investment performance of MySuper products, with products that have underperformed over two consecutive annual tests prohibited from receiving new members until a further annual test that shows they are no longer underperforming. Non-MySuper accumulation products where the decisions of the trustee determine member outcomes will be added from 1 July 2022. The funding for this initiative will be met through an increase in levies on regulated financial institutions; and
• super trustees – best financial interests duty – to improve transparency and accountability of super funds, the Government will legislate to compel super trustees to also act in the best “financial” interests of their members.
The Treasurer said this package of reforms will help improve the $3 trillion superannuation system, and save members $17.9 billion over 10 years, by:
• having an individual’s super follow them – preventing the creation of unintended multiple superannuation accounts when employees change jobs. Instead, an individual’s super will follow them so that a new employer will pay their super contributions into the individual’s existing account;
• making it easier to choose a better fund – members will have access to a new interactive online YourSuper comparison tool which will encourage funds to compete harder for members’ savings. It will show a member’s current super accounts and prompt them to consider consolidating accounts if they have more than one;
• holding funds to account for underperformance – to protect members from poor outcomes and encourage funds to lower costs, the Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members by 1 October 2021. Persistently underperforming products will be prevented from taking on new members; and
• improving transparency and accountability – the Government will increase trustee accountability by strengthening their obligations to ensure trustees only act in the best financial interests of members. The Government will also require super funds to provide better information regarding how they manage and spend members’ money in advance of Annual Members’ Meetings.
All measures will commence by 1 July 2021.
Super Guarantee: no change to rate increase set for July 2021
The Budget did not announce any change to the timing of the next Super Guarantee (SG) rate increase. The SG rate is currently legislated to increase from 9.5% to 10% from 1 July 2021, and by 0.5% per year from 1 July 2022 until it reaches 12% from 1 July 2025.
Prior to the Budget, there was speculation as to whether the Government may consider delaying this legislated SG rate increase in the interest of promoting spending and jobs, at the expense of workers’ retirement savings. Association of Superannuation Funds of Australia (ASFA) modelling has previously suggested that an average income earner aged 30 today, and on a $70,000 salary would have $71,600 less when retiring at 67 if the SG stays at 9.5%.
While the Budget did not announce any change to the start date for the SG rate increase, the Government probably does not need to decide this policy issue until next year’s Federal Budget in May 2021, ahead of the 1 July 2021 legislated change date for the SG rate.