There have been a number of changes that are designed to make Super Funds not only more accessible but also more attractive to savers. The most recent update was on the 1st of July 2007 in Australia. The upgrade focused on the superannuation associated with the scheme in terms of its flexibility, sustainability, and overall integrity. These are some of the important benefits that might accrue under this scheme.
1. Important Deductions and Incentives
It is possible to have a spousal offset for married couples which means lower fees and better returns. The other advantage is the possibility of incorporating it into other family finance programs. There are also deductions for personal super contributions which make the scheme a lot more affordable than it once was. An offset for people in the lowest income brackets has been added in order to expand the scope of the scheme.
The financials are not too bad either. There is a transfer balance cap worth $1.6 million which is restricted to pension phase accounts. However, that is also complemented by a reduction in the Division 293 income threshold. It now stands at $250,000.
2. Better Protections for Consumers
There are a number of protections for direct and indirect beneficiaries under the scheme. The non-concessional post tax contributions have been lowered with a cap of no more than $100,000 per year. Other reductions include the concessional pre-tax contributions which are now capped at no more than $25,000 per annum. It is possible for members to carry forward their concessional contributions that are unused in order to expand their current flexibility. This has been extended to five years.
The upshot is an affordable and lucrative scheme that is associated with high integrity and best practice within the industry. Many experts have credited this as being one of the most transparent and safest retirement income streams.
3. Stringent Controls Over Unnecessary Bureaucracy
There is an implicit recognition that it is often the extensive procedures that put off people that would otherwise be enthusiastic about these schemes. That is why the anti-detriment payment has now been abolished, a major win for those that wanted the funds to expand their scope and coverage. The co-contributions program represents one of the most innovative features of this scheme in that it opens up the possibility that family members can work together to expand their stake and the resultant returns from the program once they are signed up fully. Although the maximum number of members is four, there are much more imaginative ways to make use of the membership when it arises.
4. Clear Rules on Trusteeship
According to the various amendments to the program, there is now a requirement for a member of the group to be a trustee. Nobody who is not a member can be allowed to become a trustee. This is the truest sense of being a DIY fund because it gives the owners control over the destiny of the fund. The exception is that of a single member fund where a trustee might be someone that is not connected to it.
Under those rules, the requirements of trusteeship would effectively protect the consumer either way. In order to prevent possible financial exploitation, the rules do not allow a member to receive payments for performing the role of a trustee.
Bagetta & Co., a boutique financial planning firm and the creators of the Ultimate SMSF Guide, have stated that the new rules have gotten closer to alleviating the tensions that sometimes defeated these funds in their infancy. For example, the new rules prevent a member from being an employee of another. The only exception is whereby they are relatives under the strict interpretations of the fund rules. The emphasis on mutuality is a real bonus.