Federal Budget 2018: what it may mean for your super and retirement9 May 2018
The Turnbull Government announced the 2018-19 Federal Budget on Tuesday, 8 May 2018.
Removing compulsory life insurance from the superannuation accounts of young people and reuniting many Australians with their lost or inactive accounts were key measures.
For retirees, the focus was on helping both pensioners and self-funded retirees boost their income, with the Government expanding the Pension Work Scheme and allowing more people to access Centrelink’s Pension Loans (home equity release) Scheme.
Subject to legislation, these measures will be effective 1 July 2019, except where otherwise indicated.
Read the following for a summary of the proposed changes for super and pension members.
FOR SUPER MEMBERS
Changes to default life insurance
Life insurance cover will become ‘opt-in’ only for members under 25 years of age, for members who have not received a contribution for 13 months, or whose account balance is less than $6,000.
If you're in one of these categories your insurance will be cancelled after 14 months unless you opt back in. You will still, however, have the option to apply for insurance cover if you choose to do so.
Reuniting your lost or inactive super
The Australian Tax Office (ATO) will be given powers to actively reunite people with their lost super accounts.
The ATO will use data matching to find the owners of accounts who haven’t received contributions for over 13 months and have a balance of less than $6,000. These accounts will be automatically transferred to the ATO and consolidated with members’ active accounts.
Removal of exit fees and new fee caps
To encourage people to consolidate their super, exit fees will be banned from July 2019. Certain fees will be capped at 3% for balances with less than $6,000.
High income earners
High-income earners with multiple employers will be protected from inadvertently breaching the annual super contributions limits. Individuals who earn more than $263,157 a year from multiple employers will be allowed to make wages from certain companies exempt from the Super Guarantee (SG). Under current rules, individuals earning more than this amount from multiple sources face a tax bill if they contribute more than the annual $25,000 limit.
Note: this change is effective from 1 July 2018.
FOR PENSION MEMBERS
Expansion of Pension Loans Scheme
The Pension Loans (home equity) Scheme is a reverse-mortgage style scheme that enables retirees to release equity in their home to boost their retirement income.
The Scheme – administered by Centrelink – is currently not widely used and has been only open to retirees who are eligible for a part Age Pension. The Government has proposed extending the Scheme to all retirees, including full rate Age Pensioners and self-funded retirees.
Under this Scheme, full pensioners will be able to increase their income by up to 50% of the Age Pension. This will enable single retirees who own their own home to boost their income by up to $11,799 and couples to boost their retirement income by up to $17,800 for a couple without impacting their eligibility for the Age Pension or other benefits.
Expansion of Pension Work Bonus
The Pension Work Bonus allows pensioners to earn up to $250 each fortnight without reducing their Age Pension. It will be expanded to allow pensioners to earn an extra $50 a fortnight ($1,300 a year) without reducing their pension payments.
The Pension Work Bonus will also be expanded to self-employed people who will be able to earn up to $7,800 a year, without reducing their pension payments.
Work test exemption
Retirees aged 65 –74 with a super balance under $300,000 will be allowed to make voluntary super contributions for the first year that they no longer meet the work test requirements.
New Age Pension means testing for lifetime income streams
From 1 July 2019 new Age Pension means testing rules will be introduced for pooled lifetime income streams.
The rules will assess a fixed 60% of all pooled lifetime product payments as income, and 60% of the purchase price of the product as assets until age 84, or a minimum of 5 years, and then 30% for the rest of the individual’s life.
This will mean people using these products will lose fewer pension entitlements.
The full 2018-19 budget is available at www.budget.gov.au.
For further information on your super, simply call our Super Helpline on 1800 640 886 (Monday-Friday, 8am-7pm AEST).
We also have financial advice (phone-based or face-to-face) available for members. Let us know if you would like to book an appointment or find out more.