Federal Budget 2024-25

Last night’s Federal Budget was (yet again) very quiet on the super front.

Div 296 tax

There was virtually no mention in the Budget of the proposed new tax for those with more than $3m in super (Div 296 tax), other than money put aside to implement the measure for members of the Commonwealth’s defined benefit super schemes.

Arguably this was an opportunity for the Government to double down on its commitment to this measure. But perhaps they didn’t feel it was necessary. Last Friday (10 May) the Senate handed down their report into their review of the proposed legislation. Disappointingly, the report recommended the Bill be passed without amendment.

Interestingly though, the Greens (in their dissenting report) recommended:

• the $3m threshold be lowered to $2m and indexed in line with inflation,
• the actuarial formula used to determine the value of defined benefit schemes is adjusted to ensure women are not taxed higher than men due to their longer life expectancy, and
• the Bill not pass the Senate unless the Government also commits to banning limited recourse borrowing arrangements on a prospective basis.

Originally the Greens linked their support to the Government providing super on paid parental leave. It will be interesting to see whether they feel so committed to their new requirements that they are willing to derail the measure entirely. Certainly, it seems there’s still more to play out before this new tax is cut and dried.

Deeming rates frozen

Social security deeming rates will be frozen at their current levels for a further 12 months until 30 June 2025. They are currently low (0.25% up to a threshold and then 2.25% thereafter) and locking them in at this level gives (say) recipients of the age pension with financial assets subject to deeming some additional protection. It’s worth noting that the same deeming rates are used to calculate income for the purposes of the Commonwealth Seniors Health Card so even wealthier super members will benefit from this.

Super on paid parental leave

As was announced earlier in the year, from 1 July 2025, the Government will pay superannuation guarantee on Commonwealth funded paid parental leave payments.

Government no longer proceeding with changes to strengthen the ABN system

In the 2019-20 Budget, the Government proposed making changes to protect the ABN system. In an SMSF context, under these changes, failure to lodge an SMSF’s annual return for two or more income years could have resulted in the fund’s ABN being cancelled. Fortunately, the Government has now announced that they will not be proceeding with this measure.

SuperStream funding

Further money has been allocated to support the SuperStream Gateway Network Governance Body. It is hoped this money is used to improve the operation of the SuperStream system and iron out some of the existing headaches.

What we didn’t see

Unfortunately, we didn’t see any further announcements on:

• An amnesty to allow those with legacy pensions (ie complying lifetime, life expectancy and market linked pensions) to escape them – despite being first promised by the previous Government several years ago, this amnesty has still not seen the light of day. Fortunately, some individuals can exit these pensions under existing legislation – you can read more in Meg’s blog.
• Relaxing residency requirements for SMSFs – it had previously been on the Government’s agenda but draft legislation has still not been released and the issue was not discussed at all in the budget papers.

All in all, yet another quiet night.

All signs are pointing towards Division 296 tax being implemented in its current form. We have carried out extensive analysis and modelling of this tax and will be sharing it as part of our Super Intensive Day program later this year. Select the image below to register.