Superannuation largely untouched in “tough measures” budget
Nearly 2 weeks after the Budget announcements, the news is ablaze with protests and opinions on the likelihood of the measures being legislated. But from a Superannuation perspective, it’s largely business as usual.
Here’s our take:
- The government saw reason and has announced measures to allow Excess Non-Concessional Contributions to be withdrawn (along with any associated earnings) where a Non-Concessional Contribution Cap (eg $150,000 or $450,000 over 3 years) has been breached inadvertently from 1 July 2013. This administrative issue has had the potential to bite plenty of people, and though SMSF members will benefit most from this change, public offer funds are still scrambling with how they’ll practically implement the relevant calculations if they need to.
- The mandated Superannuation Guarantee Contribution will still move to 9.5% in July before being frozen for 4 years. The targeted 12% is set to kick in 2022 instead of 2019, but with at least 3 elections between now and then, there’s no guarantees on that. Our Post Budget Ready Reckoner has the current and proposed increases laid out.
- And the most talked about item is that some self-funded retirees may exceed the Income Test for the Commonwealth Seniors Health Card. Superannuation Pension Payments (that are untaxed for tax purposes) will be included in the Income Test for the first time from January 2015. Current adjusted taxable income thresholds are:
- $50,000 (singles)
- $80,000 (couples, combined), or
- $100,000 (couples, combined, for couples separated by illness or respite care).
Note that all existing account based pensions in place prior to this date will be grandfathered. Talk to us today if you’re over or nearing 65 and don’t have one in place.
For existing card holders, the Government will achieve savings of $1.1b over 5 years by ceasing the Seniors Supplement for holders of the CSHC (currently $876.20 per annum for singles and $1,320.80 combined for couples). The Clean Energy Supplement will remain in place, as will a range of concessional benefits including lower co-payments for medicines on the Pharmaceutical Benefits Scheme and access to the lower threshold for the extended Medicare Safety Net. The last payment will be made in June 2014.
- Though not specifically Super related, the Age Pension age was already set to increase to 67 by 1 July 2023. Now, from 1 July 2025, the Age Pension qualifying age will continue to rise by six months every two years, from the qualifying age of 67 years that will apply by that time, to gradually reach a qualifying age of 70 years by 1 July 2035. People born before 1 July 1958 will not be affected by this change. Also, there has been no change to the preservation age for accessing preserved superannuation benefits. See our Post Budget Ready Reckoner for Age Pension eligibility dates.
- And in case you thought the Budget Repair Levy may apply to tax free income derived from a Superannuation Pension, it doesn’t. However it has captured non-arms length income derived from SMSF Investments such as discretionary trust income, private company dividends or non-arms length transactions with related parties, increasing it from 45% to 47%.
For a full super, tax and social security budget run-down, refer to Bendzulla’s Budget Report.
Other important Super Strategies to consider right now
Changes to the Concessional Contribution Caps were introduced prior to Budget Night and will come into effect on 1 July 2014.
|Year||Aged under 59 @ 1/7/13||Aged 59 and over @ 1/7/13|
|Year||Aged under 49 @ 1/7/14||Aged 49 and over @ 1/7/14|
But the big ticket item here is if you’re considering a Non-Concessional Contribution to get money into Superannuation right now, make sure you hold off until 1 July this year where possible. The increased caps will enable you to contribute up to $90,000 extra by holding off.
|Year||Limit per year*||Over 3 years (referred to as “bring forward rule”)**|
*Annual limits applicable where under age 65, plus 65-74 where 40 hours in 30 day work test is met
**Bring forward rule only applicable if age under 65So for now, it’s more about using Superannuation effectively to reduce your tax and ensure a well-funded lifestyle for the future.
Talk to us today about a range of strategies to suit you — Call now on 1300 368 775