A collection of changes to superannuation – including a limited and partial Super Guarantee opt-out, and changes to NALI and LRBAs – have passed the Parliament.
The Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 has passed the Parliament, without amendment. It allows some employees with multiple employers to opt-out of Super Guarantee so they don’t breach the contribution caps, makes changes to the Non-Arm’s Length Income (NALI) rules for expenses, and can sometimes include Limited Recourse Borrowing Arrangements (LRBAs) in the calculation of Total Super Balance.
Super Guarantee opt-out for employees with multiple employers
Under this change, some employees with multiple employers will be able to opt-out of receiving Super Guarantee contributions. This will enable them to stop unintentionally exceeding the concessional contributions cap – there is already a limit on SG contributions to stop this happening from a single employer.
This measure was announced in the 2018/19 Budget.
Changes to NALI rules for expenses
The Bill also makes changes around the Non-Arm’s Length Income (NALI) rules and expenses.
The Explanatory Memorandum (EM) to the Bill says the purpose is to ensure that super funds can’t circumvent the NALI rules using schemes involving non-arm’s length expenses.
“Non-arm’s length expenses (whether revenue or capital in nature) incurred by a superannuation entity in gaining or producing assessable income result in such income being included in the entity’s non-arm’s length component (non-arm’s length component). This means the income will be taxed at the top marginal rate.”
This change was announced in the 2017/18 Budget.
Including LRBAs in Total Super Balance
This change would, in some circumstances, include the outstanding balance of a Limited Recourse Borrowing Arrangement (LRBA) in the calculation of a member’s Total Superannuation Balance.
One reason for this change, according to the EM, is that it “addresses the risk” that a member with a nil condition of releases could use an LRBA as part of a re-contribution strategy. Another is the risk of LRBAs with related parties on terms that are “inconsistent with those that would have been entered into between independent parties”.
“The changes to the total superannuation balance test apply to borrowings arising under contracts entered into on or after 1 July 2018. They do not apply to the refinancing of the outstanding balance of borrowings arising under contracts entered into prior to 1 July 2018, or to borrowings arising under a contract that was entered into prior to 1 July 2018,” says the EM.
This measure was announced in the 2017/18 Budget, but “following consultation, the scope of the measure as announced was reduced,” according to the EM.
In the House of Representatives, Labor unsuccessfully moved an amendment which would have changed the Bill to say: “whilst not declining to give the bill a second reading, the House criticises the Government for not doing enough to combat superannuation theft and superannuation underpayment, which is costing Australian workers more than $6 billion every year.”
Labor supported the Bill.
Status of current superannuation Bills
- Treasury Laws Amendment (2020 Measures No. 1) Bill 2020
- Before the House of Representatives | Second reading moved 12/02/2020
- Permanent tax relief for super fund mergers
- Treasury Laws Amendment (Reuniting More Superannuation) Bill 2020
- Before the House of Representatives | Third reading agreed to 11/02/2020
- Transfer superannuation held by Eligible Rollover Funds (ERFs) to the ATO
- Treasury Laws Amendment (Your Superannuation, Your Choice) Bill 2019
- Before the House of Representatives | Second reading debate 12/02/2020
- Expansion of super choice to new enterprise agreements and workplace determinations
- Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019