Provided by Mercer: 14/5/10
The Federal Budget delivered on 11 May 2010 builds on a number of changes to super announced by the Government on 2 May 2010.
The proposed changes initially announced as part of the response to the Henry Review include:
- Gradually increasing the Superannuation Guarantee (SG) from 9% to 12%, by 2019-2020 (starting 2012-2013). This change is designed to improve Australians’ retirement incomes by ensuring more money is put towards their superannuation.
- Increasing the SG age limit from 70 to 75 from 2013-2014. This means an increase in the number of people who are eligible to receive super guarantee contributions.
- Introducing a new Government superannuation contribution of up to $500 for low-income earners (individuals with adjusted taxable incomes of up to $37,000) commencing in 2012-2013 and first paid in 2013-2014. This measure is aimed at improving the retirement savings of people earning a lower income by ensuring no tax is paid on SG contributions.
- Increasing the concessional contribution limit to $50,000 for people aged 50 and over who have account balances of less than $500,000 from 2012-2013. This provides the opportunity for people over 50 (with a $500,000 or less balance) to boost their super in the lead-up to retirement.
At the same time, the Government confirmed that they had no intention of aligning the preservation age to the Age Pension eligibility age.
The 2010-11 Federal Budget confirmed these changes and added some more proposed changes to superannuation, including:
- maintaining the Government co-contribution payment at a matching dollar for dollar figure (up to $1,000) instead of returning to pre-1 July 2009 levels as previously announced.
- freezing the eligible income levels for the co-contribution for the 2010-2011 and 2011-2012 financial years. Currently the maximum co-contribution is $1,000 a year if your total income is less than $31,920 a year. The co-contribution reduces gradually, eventually cutting out where a person has total income of $61,920 or more. These thresholds will be maintained for the next two financial years and will not be indexed (as would normally occur).
A number of other initiatives were announced that don’t relate directly to super, but may impact individual investors. These include:
- A 50% tax discount on up to $1,000 of personal interest earnings on bank accounts (and other eligible deposits) from 1 July 2011.
- The option for individual taxpayers to claim a standard deduction of $500 for work-related expenses and the cost of managing their tax affairs, from 1 July 2012. This standard deduction will increase to $1,000 from 1 July 2013.
- Increased flexibility for First Home Saver Accounts. These accounts will be made more flexible by allowing money from these accounts to be paid to an approved mortgage at the end of the minimum qualifying period (generally four years) if a house is purchased during that period.
Of course these changes remain proposals at this stage and are yet to pass into legislation. Seeking the assistance of a licensed or appropriately qualified financial adviser can help you make sense of these proposals in the context of your current situation and your needs in retirement.
This information has been prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a licensed or appropriately authorised financial adviser before making any investment decision.
