- Income from account-based pensions will be deemed for both pension and Commonwealth Senior Health Card purposes.
- FBT will increase from 47% to 49%.
- You need to lobby your local representatives if you don’t want borrowing in super to be banned.
As we brace ourselves for a new year, we need to be on top of all the changes to policy and regulations. The following is a quick round-up of some of the tax, super and Social Security changes that will take place sometime in 2015.
1. Deeming of Account Based Pensions for the Aged Pension and the Commonwealth Seniors Health Care Card
These are two very important changes. Both changes involve grandfathering which means there is a before and after situation. The two changes are as follows:
- Aged Pension – Income from account based pensions (ABPs) that commence after 2014 will be deemed for aged pension purposes – this change has been legislated
- Commonwealth Seniors Health Care Card (CSHC) – Income from ABPs that commence after 2014 will be deemed for the purposes of the CSHC income test – this change hasn’t been legislated
Over the last six months we have written about these two changes quite extensively. The most recent articles were published in October, which you can read here and here.
If you want to take advantage of the pre-January 2015 rules then you’re fast running out of time. (If you need to transfer money from one super fund to another, then there is a high likelihood that you have run out of time given the time it often takes to move money between super funds.)
2. Fringe Benefits Tax – this will increase from 47% to 49% on 1 April 2015 to cover for the Temporary Budget Repair Levy.
3. First Home Owners Savers Account – the government announced that new accounts wouldn’t be allowed after mid-May 2014 and existing accounts would be abolished from 1 July 2015, however the necessary legislation hasn’t been passed by Parliament so it’s business as usual for these accounts until that occurs.
4. Paid Parental Leave – the policy that the government took to the election was expected to commence on 1 July 2015, however that policy will be adjusted and may have a new commencement date (all dependant on the ability of the government to get this legislation through the Parliament). At this stage it appears that the government will reduce the maximum that can be paid under its proposed scheme and also allow it to be a little more flexible.
5. Family Tax Benefit A & B – there are a number of changes that will occur on 1 July 2015:
- Cessation of the indexation of the end of year supplement for FTB A & B
- FTB A – the $3,796 add-on to the income threshold for each child after the first will no longer be applied.
- FTB A – the Large Family Supplement will only be paid for families with four or more children.
- FTB B – Primary income earner limit will be reduced to $100,000
6. Asset test thresholds for Centrelink/DVA pensions – the indexation of these thresholds will cease for two years commencing on 1 July 2015.
Will super gearing be banned?
Finally as you’ve no doubt heard the Financial System Inquiry headed by David Murray recommended to the government that super funds shouldn’t be allowed to borrow money.
For all of the FSI’s recommendations, the government is now considering what it should accept or reject. It has asked interested parties to make submissions to the government over the next three months.
In my mind, no evidence has been presented with exposes the potential weakness in SMSFs borrowing money.
Writing in The Australian on 8 December 2014, company director and economist Judith Sloan said, without any elaboration, that, “the SMSF sector would probably be well-advised to quietly accept” the proposal to ban super funds from borrowing money.
With respect I disagree. I do however think that some restrictions on the amount that can be borrowed should be put in place. Unfortunately a subtle change like this may be beyond the ability of our political masters.
Strong and loud voices to your political representatives are needed if you agree with my view that a ban in this area is unnecessary.
However it has to be said that the Government may accept this recommendation but will probably do so prospectively. That is, any arrangement in place when a ban commences will be allowed to continue.
Therefore if you’re attracted to borrowing money in your super fund, you should probably not allow the grass to grow under your feet for too long.
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.
