The key Budget announcements in relation to super and retirement are:

Concessional contribution caps reduced
Government co-contribution changes
Lost super
Reduction in drawdown minimums for account based pensions
Increase in the age pension age
Increase in pension payments
Tightening of the income test taper for pensions

Concessional contribution caps reduced

The concessional limits on tax deductible super contributions will be halved.  This will be effective from July 1, 2009.  Concessional contributions include, for example, employer and salary sacrifice contributions. Until now, those under 50 could put up to $50,000 a year into super at a tax rate of 15 per cent, and those aged over 50, could invest $100,000 per annum into their super at the concessional tax rate.  These concessional limits have now been cut to $25,000 and $50,000 respectively.  Because, the new limits will apply from July 1, this year’s contributions will not be affected. It is important to note that ‘grandfathering’ arrangements will apply to certain members with defined benefit interests as at 12 May 2009 whose notional taxed contributions would otherwise exceed the reduced cap.

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>>>New limits on the amount you can salary sacrifice into super don’t come into effect until 1 July 2009 so you may still be able to take advantage of the higher limits before then. Read more about salary sacrificing super.

Government co-contribution changes

The Government co-contribution rules will change temporarily from July 1.  Until now, those earning less than $30,342 a year could make an after-tax, voluntary contribution to their super and the Government would match it with a bonus equal to $1.50 for every $1.00 invested, with eligibility for the co-contribution ‘shading out’ between incomes of $30,342 and $60,342. However, the Government announced last night that the matching rate would drop to $1.00 for $1.00, meaning the maximum co-contribution would be capped at $1,000.  However, by the 2012/2013 financial year, the matching rate and maximum contribution will increase to 1.25 for every $1.00 invested, and by the 2014/2015 financial year, the full matching rates and co-contribution will be restored. 

Because, the changes apply from July 1, this year’s co-contributions will not be affected.

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>>>The good news is you can still get up to $1,500 from the Government this year if you are eligible for a co-contribution. Don’t miss out on your $1,500 reward.

Lost super

From the start of the 2010/2011 financial year, the Government will require that small and lost super accounts, i.e. those with a balance of under $200 and/or accounts which have been inactive for five years, are transferred to the Australian Taxation Office as unclaimed money.  The owners of these lost accounts will be able to reclaim their money from the ATO at any time.
 
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>>>Is it possible you have lost super from a job you were in some time ago? Track down your lost super now.

Reduction in drawdown minimums for account based pensions

The Government has extended the reduction in the minimum annual payment amounts for account based pensions for another year.  This is to help those with account based pensions to recover from any losses sustained from the global financial crisis.  The minimum pension drawdown for the 2008/2009 and 2009/2010 financial years is now 2 per cent for those aged 55-64, and 2.5 per cent for those 65 to 74.  

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Increase in the age pension age

The qualifying age for the age pension and Commonwealth Seniors’ Health Card will be increased in a phased-in basis from 2017.  Under current law, the female age pension age is 63.5, but would have been increased to 65 years by July 2013.  The current age pension age for men is 65.  Under the proposed changes, the qualifying age pension age for both men and women will increase from July 1, 2017 by six months every two years to reach 67 on July 1, 2023. 

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Increase in pension payments

Pensioners are the big winners from this year’s Budget with single pensioners on the full pension rate receiving an extra $32.49 a week from September 20 2009. This is made up of an extra $30 a week in the base pension and an extra $2.49 per week in a new fortnightly pension supplement. Pensioner couples will receive an extra $10.14 per week in the new fortnightly supplement.  There will also be some flexibility in how pensioners can access their pension and pension supplement payments, with the Government proposing to allow pensioners to receive ‘around half’ of the Pension Supplement quarterly from July 1, 2010.  In addition, pensioners will have greater access to advance pension payments. 

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Tightening of the income test taper for pensions

From September 20, 2009, the Government will tighten the income test taper on the aged pension.  At the moment, the taper for single pensioners is 40 cents in the dollar for income above the income-free threshold which is currently $138 per fortnight.  The taper rate for each member of a couple is 20 cents in the dollar above the income-free threshold which is $240 per fortnight.  From September 20 this year, this will increase to 50 cents in the dollar for single pensioners, and 25 cents in the dollar for each member of a couple. 

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