Superannuation and the 2015 Budget: Why no news is good news

Superannuation and the 2015 Budget: Why no news is good news

The second Budget for the Abbott government was handed down on Tuesday night. Many have acknowledged it to be a ‘self-preserving’ budget for this government, which was much more subdued compared to previous years. It has been geared to transition the economy from mining towards small business.

To summarise, the 2015 budget deficit is $35.1 billion, well below market expectations of $41 billion. Unemployment peaked at 6.5%, with inflation at 2.5%, which expected to stay steady.

In terms of superannuation reform, this budget had no major changes. No news is good news, as they say.

Small changes include:

  1. Supervisory levies will be increased from July 2015 to fully recover the cost of superannuation activities undertaken by the Tax Office and the Department of Human Services.
  2. Easier access to super early as a result of a terminal illness diagnosis – the life expectancy requirements will be extended from 12 months to 24 months for eligibility.

Since 2007 superannuation funds have had the ability to borrow money to invest. There was some speculation that this would be revoked in the lead up to the Budget as a result of the Murray Financial System Inquiry released last December. However, no announcements were made in relation to this at all.

There were a few changes relating to retirees, which centred mainly on eligibility for the Age Pension. These involve adjustments to thresholds for assets tests and the taper rate.

From 1 January 2017, the Age Pension assets test threshold for a single homeowner will be increased from $202,000 to $250,000 and from $286,500 to $375,000 for a homeowner couple. For non-homeowners, the assets test threshold will be $450,000 (single) and $575,000 (couple). However, although this sounds like good news, the taper rate at which the Age Pension begins to phase out will be increased from $1.50 of pension per fortnight to $3.00 of pension for each of $1,000 of assets of the thresholds. These measures will allow those with more ‘modest’ assets to have an increase in their fortnightly pension, but also significantly reduces the maximum value of assets that can be held in order to qualify. For those wealthier retirees who will no longer qualify as a result of these changes, they will continue to be eligible for the Commonwealth Seniors Health Care card.

In conclusion, similar to last year, with the cost of healthcare and the Age Pension increasing in coming years I do understand the need to maintaining a sustainable pension and social security system. Although this budget is more subdued, these measures will at least continue to address that. Additionally, I can only be happy with the government maintaining the promise that there would be no further changes to superannuation while they remain in office, which will help retain confidence in the system (and makes my job a little easier!).

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