Jane Hume carries financial chalice

Ian Rogers and John Kavanagh Finance regulation
Senator Jane Hume, a career banker now appointed as assistant minister for superannuation and financial services. Photo: Twitter
Senator Jane Hume, a career banker now appointed as assistant minister for superannuation and financial services. Photo: Twitter

Two junior ministers will share responsibility for financial services in Scott Morrison’s new government.

Michael Sukkar returns as assistant treasurer and also minister for housing, while Senator Jane Hume will be assistant minister for superannuation and financial services.
Hume, elected to represent Victoria in 2016, has a work background in banking with National Australia Bank, Rothschild Australia and Deutsche Bank. Immediately prior to her election, she was a senior policy adviser at Australian Super.
On the conservative side of politics, this brings to six the number of people have overseen the financial services portfolio over the last two terms of parliament including Arthur Sinodinos, Kelly O’Dwyer, Matthias Cormann, Josh Frydenberg, and most recently Stuart Robert.
Criticised for going into the election without much of a policy agenda, the government's new Treasury team settles into office this week with a large number of measures with impact for the financial services industry that were planned or in train when the election was called. The government will be reviewing its policy agenda but it can be expected to push on with many of these policies.

Personal tax cuts. The government plans to make a number of changes to personal income tax arrangements, playing out over the next five years.

The immediate change is an increase in the low-mid tax offset (LMITO), with an increase in the maximum amount from A$530 to $1080 a year.

There has been widespread coverage of the fact that Parliament is unlikely to sit before June 30 and the government faces a problem getting this change implemented according to its original timetable.

From 1 July 2022, the government plans to increase the top threshold for the 19 per cent tax brackets from $41,000 to $45,000.
From 2024/25 the 32.5 per cent marginal tax rate will drop to 30 per cent and the number of marginal rates will be cut to three.

CGT main residence exemption. Treasury Laws Amendment (Reducing Pressure on Housing Affordability Measures No 2) Bill 2018, removes the entitlement to the capital gains tax main residence exemption for foreign residents.

The bill passed the House of Representatives in March last year. It was before the Senate but had not been voted on before Parliament was dissolved for the election. As a result, the bill lapsed.

There has been a lot of criticism of this bill because it appears to have the unintended consequence of catching expats in the net. The government delayed passage of the bill to review it but it has not said whether it will change or withdraw it.

Preventing contribution cap breaches. The government will allow individuals whose income exceeds $263,157 and have multiple employers to nominate that their wages from certain employers are not subject to the super guarantee, from July 1, 2018.

The measure is designed to allow people to avoid unintentionally breaching the $25,000 annual concessional contribution cap as a result of multiple compulsory super guarantee contributions.

As super guarantee contributions are counted as concessional contributions, high-income earners with several employers are at risk of inadvertently breaching the concessional contribution cap. Breaching the cap exposes fund members to excess contributions tax, as well as a shortfall interest charge.

Super and older Australians. The plan is to relax the contribution work test, increase the age limit for spouse contributions and extend eligibility for bring-forward arrangements.

From 1 July next year, Australians aged 65 and 66 will be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test.

Currently, people in this group can only make voluntary contributions if they work a minimum of 40 hours over a 30-day period.

The rule change will align the work test with the eligibility age for the Age Pension, which is scheduled to reach 67 from 1 July 2023.

This comes on top of changes announced in December, when the government said that from July this year Australians aged 65 to 74 with a total superannuation balance below $300,000 will be able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test.

The age limit for spouse contributions would go up from 69 to 74. Currently those aged 70 and over cannot receive contributions made by another person on their behalf.

And the government will extend access to the bring-forward arrangements, which currently allow those aged under 65 to make three years’ worth of non-concessional contributions to super in a single year. Under the new rule, this will be extended to those aged 65 and 66.

Super insurance opt-in. The government may make a second attempt at introducing a rule that insurance within superannuation is only offered on an opt-in basis to members whose accounts have balances of less than $6000, and new accounts for members under age 25.

Salary sacrifice integrity. A bill that was before the Senate and lapsed would prevent employers from using an employee’s salary sacrifice contributions to reduce the employer’s own minimum 9.5 per cent super guarantee contributions. The bill also extends choice of super to employees covered by new enterprise agreements and workplace determinations.