What does the 2015 Federal Budget mean for my superannuation?

In the 2015 Federal Budget released on 12 May, there were a number of proposals that relate to superannuation and retirement.

Who will be affected by these changes?

Retirees: Age Pension asset test

When you apply for a government Age Pension after you retire, you will have to undergo an asset test to check your eligibility. According to Mercer’s 2015 Federal Budget report, there are both winners and losers this year with regards to this asset test.

Those with fewer assets will find it easier to acquire an Age Pension, while conversely, those with more assets could find it harder.

The threshold to receive the full pension has been increased, meaning people below the new threshold will qualify to receive the full pension:

  • For singles: It has been raised from $202,000 to $250,000
  • For couples: It has been raised from $286,000 to $375,000

The taper rate at which the pension cuts off will also increase. For every $1,000 of assets pensioners have over the new thresholds, they will receive $3 less per fortnight. This is up from $1.50 less per fortnight for every $1,000 over the threshold from last year. As a result, this affects the limit at which someone can receive at least part-pension payments:

  • Singles: Reduced from $775,000 to $547,000
  • Couples: Reduced from $1.15 million to $823,000

Who does this affect?

From January 2017, when the budget takes effect, these changes will increase pension payments for approximately 172,000 pensioners in the lower asset range, and will result in 81,000 pensioners losing access to the Aged Pension because of the higher taper rate.

Retirees: Age Pension indexation

In last year’s Federal Budget, the Australian government was going to link the Age Pension’s annual increase to inflation, rather than wages. Unfortunately, this wasn’t such a great idea, as wages grow faster than inflation, so under this plan, pensions would be growing slower than wages. This year’s budget has seen this concept abandoned.

Who does this affect?

By the government rethinking their strategy and choosing not to go ahead with this proposed measure from last year, everyone on a pension stands to benefit.

Super details: Terminal medical conditions

Though not many changes were made overall to Australia’s superannuation schemes, one of the important changes that actually took place was regarding terminally ill patients.

According to Mercer, patients who are diagnosed as terminally ill require two medical practitioners – one of which must be a specialist – to confirm that said patient is likely to pass away within one year. If this were to happen, they would have a chance to access their superannuation balance, tax free.

From July 1, 2015, however, patients with a terminal medical condition will now be able to access their super a little earlier. Under last year’s conditions, terminally ill patients had to be likely to pass away within a single year, now it has increased to two. Two medical practitioners are still required.

This process is not as simple as it may at first seem, and could depend on other influences, such as insurance payments. For those affected by this, it’s best to speak to an advisor about how this part of the Federal Budget could apply.

Super details: Lost and unclaimed super

Thanks to this year’s edition of the Federal Budget, reclaiming lost super has been made easier. The government has made a commitment to removing frustrating red tape and redundant reporting obligations in the area of lost and unclaimed superannuation.

Who does this affect?

From July 1, 2016 anyone who has lost or unclaimed super will benefit from the streamlined process.

How will your super plans be affected by this year’s Federal Budget?

High income earners – budget levy

As noted by the Mercer report, the temporary budget levy introduced last year will continue into 2017. This will see those on wages above $180,000 taxed an additional 2% on income above that threshold.

Who does this affect?

From today, this will continue to impact those with wages over $180,000. Note that if you are close to the $180,000 threshold, it might be worth considering salary sacrificing as a way to reduce your taxable income and boost your super balance.