Budget 2014

Superannuation doesn't appear prominently in the headlines about this year's Budget. The announcements as they relate to superannuation and retirement are tweaks rather than major shifts.  

Any major policy change in this area lies at some future point, possibly arising from the findings of the Murray Inquiry into the Financial System, see comments here and the Inquiry's webpage for its terms of reference. 

The first budget of the Abbott government has been handed down to start the "repair" of the budget imbalance brought about by government spending more than the tax intake since the GFC.  Treasurer Hockey has spoken since his 2012 speech in London that "the Age of entitlement is over", that the young need to "learn or earn".  The clear implication is that all Australians need to share in the repair job.  High income earner's "repair levy" for three years of tax at 49% for amounts over $180K, wages freeze for politicians, 16500 job cuts for public servants, cuts to health and education, the introduction of co-payments for medicare & pharmaceutical costs and generally a more stringent range of tests for eligibility for middle class welfare such as family tax benefits and child care benefits evidence these values of the need to prepare the nation for an ageing population with a greater drain on the public purse.

The Budget announcements for self funded retirees to know include:-

• An individual's superannuation pension will be included in the income test for pension eligibility but not the family home (as was recommended by the Commission of Audit);
• Age pensions will be indexed to CPI rather than wages from 2017 and the upper and lower thresholds for the age pension eligibility will be fixed for 3 years from 2017 (which may lead to a lowering of benefits payable for some);
• The Commonwealth Seniors Health Care Card thresholds will be indexed from 20 September 2014;
• The annual non-concessional contribution cap will go up to $180,000 from 2014-15, up from $150,000. The bring-forward rule will permit a one-off non-concessional contribution of up to $450,000 over three years, or $540,000 over three years from 2014-15;
• Non-concessional super contributions made from 1 July 2013 that exceed the cap may be withdrawn (plus earnings on the excess) without penalty (with tax payable at the individual's marginal tax rate rather than the current 47%, which had been planned to move up to 49%);
• The time frame for increasing the Superannuation Guarantee contribution rate to 12% will be taken out to 2022, compared with the former ALP government's initial timing of 2019;
• Eligibility for the age pension will be increased to 70 from 67, effective 2035 (relevant to those born after 1965).

Overall, these tweaks fall within the language of building a narrative of short-term pain for long-term gain.  We think the last word on the topic of entitlement as it relates to superannuation concessions is a long way from having been uttered.

Superannuation - campaign convergence

abc.net.au

We have been keeping you abreast of political announcements on the superannuation front since February this year: see Super Update and Super Election.

With 10 days to go before the Federal Election to be held on 7 September, it's timely to revisit the major parties' policies.

1. The 5 April 2013 statement by then treasurer Swan and superannuation minister Shorten put an end to much speculation that the tax breaks on super would be cut. Superannuation as a short term revenue fix was largely off the agenda.
2. Treasurer Chris Bowen announced on 6 August 2013 that the ALP government would not make any "major changes to superannuation tax policy" for five years.
3. The Coalition Liberal/National Opposition has met this with a pledge not to implement any "detrimental changes" to superannuation.

This means:-

1. The increase in Superannuation Guarantee to 12% will continue (the first increase began 1 July 2013) under the ALP but would be frozen at 9.25% for two years by the Coalition if elected, then the increase to 12% would be delayed by two years.
2. The Liberals have said they will wind back the Low Income Super Contribution (LISC) which refunded the 15% contributions tax for Australians who earn less than $37,000 a year. At the time this was introduced in 2012 by the ALP government, it was to be funded by the mining tax revenues, which, as we now know, have not eventuated.
3. The higher concessional caps will remain in place under the ALP and are likely to remain under the Coalition (as yet silent on the issue).
4. If the ALP is re-elected, legislation to establish its proposed Super Council will be brought forward so any future changes to legislation are consistent with an agreed Charter of Superannuation Adequacy and Sustainability. We don't know the attitude of the Coalition to the enabling legislation for the Super Council.

The Coalition intends to conduct a tax review in its first term but details are not yet available.