The Federal Budget is, as always, all over the news. Here’s a summary of the changes that directly and indirectly impact on you and your superannuation fund.
Aged Pension
Assets Test – there are two changes that will take effect on 1 January 2017:
- The asset test thresholds have been increased. Non-homeowners asset test thresholds will all be increased to $200,000 above the homeowner asset test thresholds. The maximum levels of assets at which pensions cut out have also all been lowered (see the tables below).
- The taper rate for this test has been increased from $1.50 to $3.00 per $1,000 worth of assets. If your assets exceed your relevant threshold (see below), then your pension reduces by $3 for every $1,000 you have above that threshold. This reverses a concession introduced by the Howard Government in September 2007.
What’s counted under the assets test? Every asset you own (including the market value of your super pension, collectibles, personal use assets, motor vehicles) other than your family home is counted in this test.
The Government estimates that first change mentioned above will see about 326,000 Australians either have a reduced pension or loose the pension completely. Those who lose the pension completely will still be eligible for the Commonwealth Seniors Health Card.
If you think you’re impacted then you have some time to consider your options (see Paul Rickard’s article in Switzer Daily here [1]).
Table 1 – Current Asset Test Limits
[2]Table 2 – New Asset Test Limits from 1/1/17
[3]Income Test
- Deeming – the 2014 changes that would have seen the deeming thresholds reduced to $30,000 for singles and $50,000 for couples (currently $48,000 and $79,600 respectively) have been withdrawn.
- Defined benefit pensions – at present there is an income test concession for some defined benefit pensions. Effectively, the pension income counted is reduced if it includes any tax-free component. From 1 January 2016, the maximum reduction will be set to 10% of the income paid. This will mean more pension will be included in the incomes test, which will see a fall in aged pension payments for some defined benefit pension recipients.
Superannuation
There are two changes of note:
- Terminal medical condition – from 1 July 2015, you will be able to gain access to super if two doctors certify that you have less than 24 months to live (currently 12 months)
- Penalty units – from 31 July 2015, the penalty unit fine will increase from $170 to $180 per penalty unit; SMSF trustees who receive a fine will therefore pay more.
Unclaimed savings
The previous Government reduced the time period it would claim unused bank and life insurance investments to three years of inactivity on those investments but from 31 December 2015, the old seven-year rule will be re-introduced. Children’s accounts will also be exempt.
Fringe Benefits Tax
From 1 April 2016, employees of various non-taxing paying entities, such as public hospitals and charities, will have the amount of FBT meal and entertaiment allowances capped at $5,000.
Medicare Levy
Medicare Levy low-income thresholds – will be increased from 1 July 2015. All thresholds are increasing as follows:
- Senior Australian Pensioner Tax Offset recipients – $33,044
- Couples with no children – $35,261
- Couples with dependent children – $35,261 plus $3,238 for each dependent child
- Singles – $20,896
Aged Care
- From 1 January 2016, means testing arrangements for periodic payers and lump sum contributors will be aligned. Effectively, this means the rental income exemption on the former family home will be removed.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.