The Government announced a number of changes impacting super in its 2009 Federal Budget. Read a summary of some of the key issues. Changes to concessional contribution limits- The concessional superannuation contributions cap will be reduced to $25,000 p.a. (currently $50,000 p.a.) from the 2009-10 financial year.
- The transitional concessional contributions cap for those aged 50-74 will be reduced to $50,000 p.a. (currently $100,000 p.a.). From 1 July 2012, the cap for those aged 50 and over will revert to the lower $25,000 cap (or the indexed amount at that time).
What do you need to think about? Consider whether you can make the most of the higher caps ($50,000 or $100,000) that apply until 30 June 2009. Review your salary sacrifice arrangements from 1 July 2009.
Temporary reduction in Government co-contributionsThere will be a temporary reduction in the Government co-contribution from 1 July 2009. The temporary rates are: - From 1 July 2009 until 30 June 2012, the maximum rate will be 100% (that is $1 for each dollar you contribute), up to a maximum of $1,000 per annum for a $1,000 personal after-tax contribution
- For 2012-13 and 2013-14, the maximum rate will be 125% (that is $1.25 for each dollar you contribute)
- For 2014-15 onwards, the maximum rate will revert back to 150% (that is $1.50 for each dollar you contribute).
What do you need to think about?
Consider taking advantage of the current co-contribution arrangements before 30 June 2009 to receive up to $1.50 for each dollar you contribute. Note that from 1 July 2009, any salary sacrifice contributions you make will count towards your income to determine eligibility for this and other Government benefits, with the result that those entitlements may be reduced or eliminated.
Private health insurance- From 1 July 2010, higher income earners will receive a lower level of rebate for private health insurance. The current rebate of 30% will remain for lower income earners.
- The Medicare Levy Surcharge will also be adjusted for higher income earners.
Under the new arrangements, the rebate and Medicare Levy Surcharge for people under age 65 from 1 July 2010 will be as follows:
| Income level | Rebate | Medicare Levy Surcharge | Up to $75,000 (singles) Up to $150,000 (couples) | 30% | Nil | $75,001 – $90,000 (singles) $150,001 – $180,000 (couples) | 20% | 1.0% | $90,001 – $120,000 (singles) $180,001 – $240,000 (couples) | 10% | 1.25% | $120,001+ (singles) $240,001+ (couples) | Nil | 1.5% |
Income level rebate Medicare Levy SurchargeWhat do you need to think about? If you’re a higher income earner, you will either pay more for your private health insurance or be subject to a higher Medicare Levy Surcharge. From 1 July 2009, certain salary sacrifice and some other non-compulsory employer superannuation contributions will be counted as income when assessing your liability for the Medicare Levy Surcharge.
Paid parental leave- A Government funded paid parental leave scheme will commence from 1 January 2011. This will provide income of $543.78 (indexed) for up to 18 weeks.
- Primary carers will be eligible for the scheme if they:
- earned less than $150,000 in the full financial year prior to the birth or adoption of a child; - have worked at least 330 hours over the 10 months preceding the birth or adoption of a child; and - have also worked continuously with one or more employers for at least 10 of the 13 months before the expected date of birth or adoption. - If you access paid parental leave, you will be unable to claim the Baby Bonus, Family Tax Benefit Part B and some dependant’s tax offsets.
What do you need to think about?
It appears it will be necessary to choose between the parental leave payments and the other benefits listed above. You may need to seek financial advice to determine the most appropriate option for you.
Age pension age increase- The qualifying age for the Age Pension will gradually increase from 65 to 67 by 2023 - increased by six months every two years, commencing from 1 July 2017 and reaching 67 on 1 July 2023.
The table below shows how the age pension age will change:
| Date | New age pension | Affects people born | When group reaches new age pension age | | 1 July 2017 | 65 yrs & 6 mths | 1 July 1952 to 31 December 1953 | 1 January 2018 to 30 June 2019 | | 1 July 2019 | 66 yrs | 1 January 1954 to 30 June 1955 | 1 January 2020 to 30 June 2021 | | 1 July 2021 | 66 yrs & 6 mths | 1 July 1955 to 31 December 1956 | 1 January 2022 to 30 June 2023 | | 1 July 2023 | 67 yrs | From 1 January 1957 | From 1 January 2024 |
What do you need to think about? If you want to retire at the ‘traditional’ age of 65, you will have to, in the future, self fund your retirement for somewhere between 6 months and 2 years.
Increased Government pension- From 20 September 2009, pensioners will get an overall increase in their pension of:
- $32.49 per week for single pensioners on the full rate of pension - $10.14 per week for pensioner couples (combined) on the full rate of pension.
The increase applies to the Age Pension, Disability Support Pension, Carer Payment, Veterans’ Service Pension, Income Support Supplement, War Widow/ers pension, Bereavement Allowance, Wife Pension and Widow B pension.
Income test for pensioners to change- From 20 September 2009, payments to pensioners will be reduced by 50 cents for each extra dollar of private income above the ‘income test free threshold’ (currently pension payments are reduced by 40 cents for each extra dollar of private income).
- This ‘income test free threshold’ is currently $138 per fortnight for single pensioners and $240 per fortnight for pensioner couples (combined).
- A transitional safety net will apply for existing pensioners who would otherwise face a payment reduction because of this change.
What do you need to think about?
From 20 September 2009, if you receive the above Government pensions and you’re over the ‘income test free threshold’, you may receive less pension.
Commonwealth Seniors Health Card- From 1 July 2009 salary sacrifice contributions to superannuation will be included in the income test for determining eligibility for the Commonwealth Seniors Health Card.
What do you need to think about?
From 20 September 2009, some members who were previously eligible for the Commonwealth Seniors Health Card will no longer qualify.
Allocated pension drawdowns- The minimum income amount that must be paid from account based pensions (allocated pensions and transition to retirement allocated pensions) will be halved for the 2009/10 financial year, (which is an extension of the provision that was introduced in February for the 2008/09 financial year).
What do you need to think about?
If you have an account based pension, you will be able to reduce the amount of income you receive from your pension. For some people this may result in an increase in their Age Pension entitlement. | Age | Percentage of account balance | New percentage for 2009/2010 | | Under 65 | 4% | 2% | | 65-74 | 5% | 2.5% | | 75-79 | 6% | 3% | | 80-84 | 7% | 3.5% | | 85-89 | 9% | 4.5% | | 90-94 | 11% | 5.5% | | 95+ | 14% | 7% |
Pension Bonus Scheme abolished- The Pension Bonus Scheme will be closed to new entrants from 20 September 2009 and will be replaced with a new Work Bonus which will only include half of the first $500 of employment income earned per fortnight under the pension income test - this will enable up to $250 of earnings a fortnight to be excluded from the income test.
What do you need to think about?
If you are already registered for the Scheme (before 20 September) you will be able to remain in the Scheme and claim your Bonus when you cease working.
Transition to retirementThere is no change to tax treatment of Transition to Retirement Allocated Pensions.
Personal income tax ratesFor the year commencing 1 July 2009, the resident tax rates will be as follows: | Taxable income ($) | Tax payable ($) | | 0 – 6,000 | Nil | | 6,001 – 35,000 | Nil + 15% of excess over 6,000 | | 35,001 – 80,000 | 4,350 + 30% of excess over 35,000 | | 80,001 – 180,000 | 17,850 + 38% of excess over 80,000 | | 180,000+ | 55,850 + 45% of excess over 180,000 |
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