2009 Federal Budget - Superannuation Highlights

No matter what anyone tried to do it was impossible to escape the leaks, the pre budget softening up and now the good and bad news has been disclosed.

Our first newsletter is about the changes to superannuation.

The major change is the halving of tax deductible contributions from 01/07/2009.

A summary of these changes is below.

Our full bullet point summary with some comments will be out in the next couple of days. Below is a summary of the superannuation changes.

Maximum Tax Deductible Super Contributions Cut From 1 July 2009

As widely leaked in the days leading up to the Budget, the Government has halved the concessional (deductible) contributions for those under 50 years of age (from $50,000p.a. to $25,000pa.) and also for those over 50 years (from $100,000p.a. to $50,000p.a). In relation to over 50's, the Government has also indicated that this deduction will be further reduced from $50,000p.a to the same level as under 50's from the 2012/13 financial year onwards.

Note that these reductions apply for the 2009/10 years onwards.  They will not affect contributions made on or before 30 June  2009.

Halving of Minimum Pension Drawdown to Continue in 2009/10

Earlier in the year, the Government announced that for the 2008/09 financial year, the minimum drawdown amount for a range of pensions would be reduced by half.

The Government has now decided to extend this concession to the 2009/10 year. So, for example, whereas the usual minimum amount to be drawn-down by members aged under 65yrs of age receiving a minimum-only pension would be 4%, for 2008/09 (and now for 2009/10) it will be 2%.

Government Co-Contribution to be Temporarily Reduced

From 1 July 2009 onwards, the Government Co-Contribution will reduce to a maximum matching rate of 100% of an eligible member’s contributions. The other conditions (to do with eligibility and shade-out requirements) will remain unchanged. The maximum Co-Contribution rate will be gradually increased again as follows: from 2012/13 - 125%; from 2014/15 onwards - 150%.

This is still a very good deal for those who qualify.

Superannuation Pension Amounts Not To Be Included in Seniors Health Card Test

Previously, the Government had announced that the Commonwealth Seniors Health Card income test was to be amended to include gross tax-free superannuation pension income as part of the adjusted taxable income test.  The Government will not, now, proceed with that.

However, the decision to add-back any salary sacrifice contributions to adjusted taxable income will remain, with effect from 1 July 2009.

Commitment to Tax-Free Super for Over 60’s Remains...For Now

The Government is presently undertaking a comprehensive review of the Australian taxation system (colloquially called the “Henry Review”). They had previously indicated that this would not be considering the tax-free status of superannuation for people over 60yrs of age.

However, that was before the present worldwide recession (calling it the GFC makes it sound like a well known takeaway). Given that, and given that tax-free super payouts for over 60's must look like such mouth wateringly under-taxed morsel to a Treasurer, we were interested to see if that commitment still remained. It appears that it does (for now, at least). Here's what was said:-

The Government has commissioned a comprehensive review of Australia's tax system to create a tax structure that will position Australia to deal with the demographic, social, economic and environmental challenges  of the 21st century. The review will encompass Australian Government and State taxes, and interactions with the transfer system. It will reflect the Government's policies not to increase the rate or broaden the base of the GST and to preserve the tax free status of superannuation payments to those aged over 60.

MOU Signed to Allow Portability Between Australian and New Zealand Super Schemes

The Government has agreed in principle to the signing of a memorandum of understanding with New Zealand to establish a trans-Tasman retirement savings portability scheme. The scheme will have effect from a date set in accordance with the momentum of understanding. The final details of the scheme are currently being settled with New Zealand.

The trans-Tasman portability scheme will permit transfers of superannuation savings between certain Australian superannuation funds and New Zealand KiwiSaver funds. Currently, members of Australian superannuation funds may only transfer their retirement savings within the Australian superannuation system.

With the continuing migration of New Zealanders' to Australia this is a benefit to our Kiwi friends. With further apologies to our Kiwi friends this is perhaps another small step to economic integration between Australia and New Zealand and should it ever come about New Zealand becoming the seventh state. What would happen to the Bledisloe Cup?
 

Please call our office on 1800 778 000 if you have any questions.

Jim Vagne

Lifequotes Pty Ltd

Authorised Representative of

Stratus Wealth & Risk Management Pty Ltd