2011 Budget: Not much for super except more complexity

24/05/2011


Provided by Mercer. The information in this article does not necessarily reflect the views of the Trustee.


The Budget for 2011/2012 is considered to be economically responsible and features positive measures to help boost investment infrastructure and workforce skills development. However, for superannuation members the Budget includes initiatives that deliver only relatively minor benefits, at the cost of greater complexity.

Here are a few highlights relating to super from the 2011 Federal Budget:

Pension drawdown relief

The Government will phase out the current reduction in the minimum income requirement for account based pensions - the minimum pension drawdown will be reduced by 25 per cent for 2011/2012 and will return to the standard minimum requirements from the 2012/2013 financial year.

This measure is positive for pensioners, providing welcome 'drawdown relief' while the effects of the global financial crisis continue to reverberate across financial and investment markets. However the relief is less than the current 50 per cent reduction.

What you need to do

If you have an account-based pension and you have taken advantage of the 50% reduction, you will need to increase your income in 2011/2012 to meet the new minimum pension income requirements.

Earnings thresholds for the government co-contribution

The Government co-contribution is an initiative whereby the Government puts extra money into your super account if you make extra contributions to your super. Some conditions apply.

The earnings thresholds for co-contribution purposes will be frozen for another year to 2012/2013. The maximum co-contribution of $1,000 is payable to those with total income of $31,920 or less (with the co-contributions phasing down for total income up to $61,920). This measure will continue to freeze these thresholds (of $31,920 and $61,920) until 30 June 2013.

Refund of excess concessional contributions

Responding to concerns about the unfair impact of excess concessional contributions tax on superannuation contributions, the Government has announced it will allow anyone who has gone over the concessional contributions cap for the first time, by $10,000 or less, the option to have those contributions refunded. The refunded contributions will be taxed at the person's marginal tax rate.

While this measure will assist some people, unfortunately it is only available once for breaches on or after the 2011/2012 financial year. Further, no announcements were made in relation to breaches of the non-concessional contributions cap.

What you need to do

Caps apply to contributions made to your super fund each financial year. As any super contributed over a cap amount is subject to extra tax you should monitor your contribution levels carefully.

Other announcements relevant to superannuation members

The Government has announced it will seek to implement several initiatives announced previously.

  • The Superannuation Guarantee (SG) will eventually increase from 9% to 12% commencing from 1 July 2013, and the Superannuation Guarantee age limit will increase from 70 to 75 from 2013/2014 onwards.
  • The $50,000 concessional contribution cap for those over aged 50 and older with account balances of less than $500,000 will be frozen at $25,000 more than the standard concessional contribution limit. The proposal would allow individuals aged 50 and over (with a balance below $500,000) to continue benefiting from the $50,000 concessional contribution limit.
  • The budget contains a number of initiatives aimed at boosting workforce participation. Of particular interest for mature age workers is the announcement that the current “Work Bonus” will be improved so that age pensioners who work will be able to earn up to $250 per fortnight above the income test threshold before their pension is affected.
  • The Government has announced additional funding and new initiatives to boost investment in infrastructure. This extends the range of investment opportunities for superannuation funds, and eventually could help facilitate a deeper and more liquid market for listed Australian infrastructure securities.


Greater use of tax file numbers

This announcement delivers on the Government's election commitment to allow superannuation funds to make greater use of tax file numbers (TFNs) in order to locate member accounts and to facilitate consolidation of multiple member accounts.

What this means for members

Members need to ensure their super fund holds their TFN. A reduction of multiple/lost accounts will be of benefit to members while making consolidation of accounts easier.

Information to members about their employer contributions

With effect from 1 July 2012:

  • employees and employers will received quarterly notification from their super fund if their regular payments cease
  • employees' payslips need to include information about the amount of superannuation actually paid into their account.


These measures will help employees to keep track of their employer's contributions and to take action if there is a shortfall.

What this means for members

Members will be able to better monitor their employer super contributions.

Further health reform

In the 2009/10 budget, the Government has proposed that the level of rebate provided in respect of private health insurance be reduced for higher income earners whilst the current 30% rebate is to remain for middle and low income earners. To incentivise individuals to remain within the private health care arena, it was also proposed that the Medicare Levy Surcharge be increased for higher income earners. These proposals have been defeated twice in the Senate, however, it appears that the Government may seek to get similar legislation passed after 1 July 2011 when the balance of power in the Senate shifts.

When proposed, the following Medicare Levy Surcharge and rebate for people under 65 were proposed:

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%


What this means for members

If implemented, higher income earners may either pay more for their private health insurance or be subject to a higher Medicare Levy Surcharge.

How can we help you?

Call the Helpline to discuss how any of these issues may affect you, or to make an appointment to speak to a licensed financial adviser.

 

This information has been prepared by Mercer Outsourcing (Australia) Pty Ltd (MOAPL) ABN 83 068 908 912, Australian Financial Services Licence #411980. Any advice contained in this document is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this document, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek professional advice from a licensed, or appropriately authorised, financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2012 Mercer LLC. All rights reserved.

 

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