- Federal Government budget impacts
- Rumours of a delay in access to super
- Start of ASX mFund
- Delayed start to Superstream data standard
May was budget month and, whilst the Government managed to upset just about everybody, superannuation escaped further damage for now. Let’s take a look at the budget impacts and other developments during the month.
2014 Federal Budget
As expected, the Government has announced new rules for excess contributions to super. The changes are intended to make the treatment of non-concessional contributions consistent with the previous Government’s change to the treatment of excess concessional contributions, with super members allowed to withdraw any excess and pay tax at their personal tax rate. Detailed rules will only be released after consultation with industry groups, so we’ll have to wait and see exactly how it will work.
There were a number of changes to the age pension rules including:
Increase to entitlement age – From 1 July 2035, the entitlement age for the age pension will be 70 years (the previous Government had increased it to 67, from 1 July 2023). The increase, from age 65 presently, will occur in six month increments starting on 1 July 2017 (when it will increase to 65.5 years of age). It will increase by six months each two years after that, until it reaches 70.
Change of indexation methodology – From September 2017, the indexation of the age pension will be linked to CPI and not benchmarked against movements in wages.
Freezing of thresholds – For three years, starting 1 July 2017, the thresholds for the Income Test and Assets Test will be frozen at the then prevailing levels.
- Reduction in deeming thresholds – From September 2017, the deeming thresholds for the Income Test (see Age pensions and super income streams: Lifting the fog) will be reduced. The threshold will fall from $46,600 to $30,000 for singles and from $77,400 to $50,000 for couples. Effectively, this is an increase in the deeming rate which applies to financial assets (including, from 1 January 2015, superannuation accounts).
When combined with the new deeming rules commencing 1 January 2015, these changes will see a significant reduction in the number of people eligible for the age pension and the amount of pension they receive.
In SMSF Alert: March 2014, we discussed the potential inclusion of super in the income test for the Commonwealth Seniors Healthcare Card. We worried that the Prime Minister’s ‘crystal clear commitment’ to indexing the income threshold for the card was a sign they were about to give on the one hand and take with the other.
Sure enough, that’s how it turned out on Budget night. From 1 January 2015, income on super accounts (calculated using the deeming rules) will be included in the health care card’s ‘income test’. Cardholders at that date won’t have to include existing super pensions. But they’ll need to include new pensions (including switching the existing one).
Finally, the Government has introduced a 2% deficit levy, to apply to taxable income over $180,000 a year, for the next three years (starting 1 July). Whilst it doesn’t affect super directly, it will make concessional super contributions a little more attractive for that period since there’s been no change to the 15% super tax rate (or the 30% rate that applies to those earning $300,000 and above).
If you’re concerned about a particular announcement please send us a question via our Q&A feature.
Delay in access to super
Following the budget, rumours have been circulating about a possible lift in the age at which people can access their super. The Government has said it’s something they’ll consider in their ‘second term’.
That commitment wasn’t expressly ‘crystal clear’ so there’s a chance it’s genuine, but it should serve as a reminder that it’s worth keeping some savings outside the superannuation system. If you’re a way from retirement, the safe assumption is that you’ll have to be much older before you can access your super in the future.
Launch of ASX mFund
In ASX mFund: Putting for dough we reviewed the ASX’s new managed fund settlement service. We’re pleased to advise it’s now up and running.
Unfortunately CommSec haven’t yet signed on as a broker, but some of the other popular brokers (including E-trade and Belldirect) already offer it. A full list of the current brokers, fund managers and available funds can be found at the ASX mFund website.
Delay to Superstream data standard
In Superstream data standard: Is your SMSF ready? we explained the new electronic payment procedures for super contributions and transfers. The deadline for larger employers to start using the new standard was 1 July, but the Government has just announced this will be extended to 1 July 2015. This will give some people more time to act but remember to check with your employer when they intend to start, since many may proceed anyway.
Other recent developments
Members may also be interested in the following:
Tax Office guidance on super pensions – The Tax Office has updated its website with new information for SMSF trustees on starting and stopping pensions, minimum pension payment requirements and timing of a pension payment.
Tax Office educational videos – The Tax Office has released two videos, the first in a planned series explaining SMSF obligations. The videos are available in the most recent SMSF News.
- SuperSeeker tool – The Tax Office has updated its SuperSeeker tool. It allows you to check all your super accounts, find lost super, find ATO-held super and transfer your super into your super account.