May 2009 Newsletter (Budget edition)

Welcome to the special Budget edition of our SuperGuide newsletter, the only INDEPENDENT newsletter for consumers on superannuation in Australia. And it’s free.

The more you delve into the Budget changes affecting superannuation fund members and retirees, the more cynical you become at the effort devoted to political spin. I have uncovered some disturbing detail hidden behind many of the headlines. In THE SOAPBOX this month, I take you through some of the super swifties that snuck through relatively unnoticed. I also probe some of the more significant ‘good news’ announcements affecting super savers and retirees. Feel free to contact us if you have an issue that you believe needs to be explored in THE SOAPBOX.

If you have sent in a question, and are still awaiting a response, I haven’t forgotten you. Due to the many leaks coming from the Government in the weeks leading up to the Federal Budget, I held off from responding to questions until I knew what changes were going to be made to the super and retirement rules. I will attempt to answer your question within the next few weeks. There is a small backlog but I will be on top of these questions very soon.

We also want to spread the word about our free website, www.superguide.com.au. I started this website because I passionately believe that Australians are entitled to independent information about something as important as financial security, and retirement.

I am very proud of SuperGuide, and I hope you find our newsletter and website helpful. If you like this newsletter and our website, then please pass on the newsletter to your friends and encourage them to sign up for SuperGuide newsletter. As consumers, we have more influence with decision-makers when we speak as a group.

What’s in store for JUNE edition: In next month’s edition, we will be publishing more on the implications of the Budget changes for readers. I also promise to outline what I believe are the top 10 problems with our super system, in response to the latest Government review on super. Perhaps constant change needs to be ranked at number one! We also return to our regular sections, including Q and As, and our DIY SUPER section.

Trish Power

BUDGET HIGHLIGHTS FOR SUPER SAVERS AND RETIREES

THE SOAPBOX: Does the Government think we’re stupid?
As a budding novelist, I love to read a good work of fiction, and on many levels, that’s an appropriate way to describe this latest Federal Budget – a fiction, or more precisely, an artifice. By treating the Budget as a work of fiction, I can then enjoy the parliamentary performance as a play on words.
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Budget snapshot for super savers and retirees
* Concessional contribution cap cut to $25,000 from July 2009
* Government co-contribution cut to $1000 from July 2009
* ‘Lost’ account balances of less than $200 to be transferred to the ATO
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SUPERANNUATION

Budget changes hit hard for super savers
The Government just couldn’t resist tinkering with the superannuation rules. From 1 July 2009, the annual concessional (before-tax) contributions cap of $50,000 is to be halved to $25,000. While the transitional concessional cap for over-50s of $100,000 is to be halved to $50,000, and then revert to $25,000 from 1 July 2012.
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Non-concessional contributions caps hit by Budget changes?
In one of the more sneaky Budget tricks conjured by the Government, the non-concessional contributions cap has been cut by $15,000 for the 2009/2010 year, and the bring forward cap cut by $45,000. (Non-concessional contributions are voluntary contributions not claimed as an income tax deduction by you or your employer.)
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Pension drawdown relief extended for 2009/2010 year
In the Federal Budget, the Government announced the extension of the drawdown relief provided for account-based pensions. What this means for individuals receiving superannuation income streams, is that for the 2009/2010 year, the minimum payment amounts for account-based pensions are to be halved.
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Surprise turnaround on income test for Seniors Card
Contrary to pre-Budget announcements, the Government is not proceeding with the measure to include gross tax-free superannuation pension income in the adjusted taxable income test for the Commonwealth Seniors Health Card.
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AGE PENSION CHANGES

$32 per week increase in Age Pension
The highlight of the 2009/2010 Federal Budget is a $32 weekly increase in the single Age Pension. From 20 September 2009, single pensioners can expect to see an extra $64.98 in their fortnightly Age Pension, which is a weekly increase of $32.49. This Age Pension increase is made up of an additional $30 per week in base pension, and an extra $2.49 a week in a new fortnightly ‘Pension Supplement.
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Budget flags radical changes to Age Pension
* Increase of $32.49 per week for single Age Pensioners, and $10.14 for couples (see article ‘$32 per week increase in single Age Pension’)
* Age Pension age to increase to 67 from 2023 (see article ‘Age Pension age set to increase to 67’)
* New index, the Pensioner and Beneficiary Living Cost Index, introduced for adjusting Age Pension (see article ‘$32 per week increase in single Age Pension’)
* Closure of Pension Bonus Scheme from 20 September 2009 (see article ‘Generous Pension Bonus Scheme to close 20/09/09’)
* Harsher income test for Age Pensioners
* Introduction of Work Bonus to encourage work participation by Age Pensioners
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Age Pension age set to increase to 67
In a surprise Budget announcement, the Federal Government has flagged that the Age Pension age is set to increase to 67 years of age from 2023. Currently, Australians can access the Age Pension at age 65 (for men) and from 63.5 years (for women, although the Age Pension age was moving to 65 for women from 2014).
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Generous Pension Bonus Scheme to close 20/09/09
In what must be a Pinochio moment (of which there are many – see this month’s THE SOAPBOX: Does the Government think we’re stupid?), the Government is closing the Pension Bonus Scheme (PBS) to new entrants from 20 September 2009. The reason? The scheme is too complex and not meeting its objectives of encouraging workforce participation.
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