Policy changes will impact existing or future super income as a result of the Coalition winning the federal election. Here’s how:The election seems like a distant memory. In the last few weeks we have covered the possible impact to property owners, young families and business owners. This week, we focus on how retirees and their superannuation are likely be affected by the federal election result.
Trying to stay up to date with changes to Australia’s complex super system is a full-time job in itself, but if you’re retired (or planning for retirement), you need to be aware of how the change in government will affect your finances.
The good news
Retirees are a core consistency of the Coalition and they can be reasonably confident the new government has their best interests at heart.
Here are the major policies likely to have a net positive impact on retirees’ incomes:
- Tax-free super for over-60s to be retained (probably). While the Coalition hasn’t explicitly committed to not taxing super benefits they did vow to “ensure that no more negative unexpected changes occur to the superannuation system”. That would seem to indicate your super is safe from the taxman, at least for the short to medium term.
- Increase of concessional caps and co-contribution payments. Once again, the Coalition has been cagey about making any promises but it seems it will follow through with its predecessor’s plan to have a $35,000 cap for over-50s as of July 2014. What’s more, the Coalition has promised to “revisit concessional contribution caps and super co-contributions for low-income earners once the budget is back in a strong enough position”.
- Review minimum pension payment rules. The new government is launching a review to see if the existing rules are adequate given current market conditions, with the intention of ensuring self-funded retirees don’t run out of savings due to inappropriate forced withdrawal of pension payments.
- Extending age pension deeming rates. If silence is read as consent, it can be assumed that the Coalition plans to honour the previous Labor government’s commitment to lower the deeming rate from 3 per cent to 2.5 percent for financial investments under $77,400 for couples, or up to $46,600 for singles, and from 4.5 to 4 per cent for investments over those amounts.
The bad news
And the policies with the potential to have a negative impact:
- Tax-free Removal of the Low Income Super Contribution (LISC). The previous government planned to use some Mineral Resource Rent Tax revenue to assist those workers earning less than $37,000, by refunding the contributions tax deducted from their super account. With no mining tax there is no LISC, however, as noted above, the Coalition is keen to make the super system less regressive when the nation’s finances permit.
- Support for soaking the rich. Once again, if silence is taken as consent, it looks like the Coalition will be going ahead with the previous government’s plans to introduce a 15 per cent tax on pension earnings above $100,000 a year, as well as maintaining the 30 per tax on the concessional contributions of anyone earning over $300,000, introduced last year.
There are a range of other post-election changes being made, such as delaying the Superannuation Guarantee increase, which either won’t have much impact on those who are retired (or close to it), or are relevant only to particular groups. To find out more, go to australia.gov.au.