Date posted: 25/10/2022

Federal Budget 2022-23: The superannuation measures you need to know

An overview of the new measures from the October Budget as well as what survived (and what didn’t), what remains unknown and a rumour that didn’t see the light of day.

In Brief

  • New measures centre around off-market share buy-backs, penalty units and housing investment.
  • SMSF residency rules and downsizer superannuation contributions remain.
  • There has been no announcement in relation to the non-arm’s length income and expenditure provisions.

It was survival of the fittest in the superannuation arena on October Budget night. In addition to four brand new and shiny measures, there were a few old measures that survived the transition to the Labor Government and some that did not make the cut. We also outlined those measures that remain unknown and could be a survivor yet. 

New superannuation measures 

Off-market share buy-back integrity measure

This will align the tax treatment of off-market share buy-backs undertaken by listed public companies with the treatment of on-market share buy-backs, and applies from 7:30pm (AEDT) on 25 October 2022.

We expect this to be an unpopular announcement. Why is this change being made? Revenue from super funds was $26.5 billion in 2021-22 and is expected to fall to $12.6 billion in 2022-23.

The Budget papers note that “utilisation of franking credits made available through the payment of a significant in-specie dividend, coupled with recent off-market share buy-back activity, is the key driver of the revision…”.

Over the forward estimates, the Government expects super fund tax revenue to increase due to the growth in employer contributions. Additional revenue will also arise because of this off-market share buy-back integrity measure.

Penalty Unit (PU) increase

From 1 January 2023, penalty units will increase from $222 to 275 per penalty unit or $1,110 to $1,375 for a corporation - a 19.3% increase. Indexation by CPI every three years will remain in place with the next indexation to take effect on 1 July 2023.

Housing investment opportunities

The Government will create a Housing Accord (with all levels of Government, investors and housing construction companies) to enable more than 1 million houses to be built between mid-2024 and mid-2029, including money for affordable dwellings using “innovative financing”. A $10 billion Housing Australia Future Fund will be established to enable more social housing together with State and Territory Governments and private capital providers including super funds. The Government will allocate money from the National Housing Infrastructure Facility to potentially attract institutional capital for new social and affordable dwellings.

The Government appears keen to access the “rivers of employer contribution gold” flowing into APRA regulated super funds. It remains to be seen if these opportunities will also be available to SMSFs.

Managed Investment Schemes (MIS) Review

The Government has announced that it has made a specific allocation of money to Treasury to review MIS.  Currently we don’t know anything further about this review, including its terms of reference and who will conduct it.

Measures that survived

SMSF residency rules

This measure will proceed and will allow greater flexibility for SMSFs with members living overseas greater flexibility.

Its commencement date has changed. It will now commence at the start of the income year on or after the date of Royal Assent of the enabling legislation.

Downsizer Superannuation Contributions

Those aged at least 55 will be able to access the downsizer rules. This was first announced as a commitment from Labor during their recent election campaign. This amendment is before the Senate and it will most likely commence from 1 January 2023.

Measures that didn’t survive 

SMSF three-year audit rule 

This idea was first proposed in the 2018 Budget and was due to commence on 1 July 2019.

For many years we officially heard nothing about this policy and assumed it had quietly died.  We welcome the fact that this Budget has made its death official.

Retirement income product metrics in PDSs

The previous government first announced this measure in 2018 and had found it difficult to implement. It has been discontinued.

Measures that remain unknown

All quiet on the NALI/E front

There has been no announcement on where the Government has landed in relation to the non-arm’s length income and expenditure provisions.

Together with other associations, CA ANZ has pointed out to the Government the importance of providing certainty for the superannuation sector as soon as possible.

We agree that there needs to be an anti-avoidance provision, but it needs to be fair and not penalise relatively benign transactions for all superannuation funds.

Early release of superannuation

The then-Coalition Government potentially wanted to change the compassionate grounds and financial hardship access rules and also wanted to allow victims of crime to access the perpetrators superannuation balances. There has been no announcement about this rule.

Comprehensive Income Product in Retirement (CIPRs)

The previous government had announced in 2018 that CIPRs would have to be provided for at least $100,000.  We had no announcement about this policy.

Legacy Pension Conversions

This was first announced in the 2021 Budget and was designed to provide a two-year window to restructure of lifetime, life expectancy and market linked pensions.  We await further updates on this policy.

Super Consumer Advocate

First announced in the 2019 Budget,  the Government sought expressions of interests (EOI) to identify options to support the establishment of a Superannuation Consumer Advocate.

What didn’t see the light of day?

The budget papers contained nothing about the removal or disallowance of indexation of contribution caps or the Transfer Balance Cap. (We don’t want to be starting any rumours, but this measure could be in the May Budget with a 1 July 2023 start date.)

 

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