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In this episode Gavin Martin, Financial Adviser / Financial Planner, explains the personal finance and superannuation announcements the Federal Government made as part of the Mid-Year Economic and Fiscal Outlook (MYEFO) that has been termed a Mini-Budget due to the range of cut backs. The discussion, includes:
- Extension of draw down relief for super pensions – The Government has announced it intends to extend the 25% drawdown relief for the 2012/13 year.
- Low income superannuation contribution – The Government has previously announced and introduced legislation to effectively provide a refund of 15% contributions tax for low income earners from 1 July 2012. Taxpayers with adjusted taxable income of up to $37,000 will receive a low income superannuation contribution (LISC) up to a maximum of $500. The Government intends to simplify the process for eligible individuals.
- Superannuation co-contribution – The Government intends to reduce the matching rate and maximum payment for the superannuation co-contribution from 1 July 2012. This coincides with the commencement of the LISC. The co-contribution will reduce from $1,000 to $500. The matching rates remains at $1 for $1, however, eligibility for the co-contribution cuts out at $46,920. Currently the cut out threshold is $61,920.
- Abolition of age limit for Superannuation Guarantee contributions – Currently, employers are not required to make Superannuation Guarantee payments for employees age 70 and over. From 1 July 2013, employers will be required to make Superannuation Guarantee contributions for eligible employees aged 70 or older. Other existing exemptions from paying Superannuation Guarantee contributions will continue to apply, such as an employee earning less than $450 per month.
- Pause on concessional contribution indexation – The Government will pause the indexation of the concessional contribution cap (currently $25,000) for one year in 2013/14. It is expected that the concessional contribution cap will be indexed from 2014/15, increasing to $30,000. This also means the Non Concessional Contributions will not be indexed as it is six times the concessional contribution cap.
- Self Managed Superannuation Fund Trust deed clauses - Currently, some trust deeds include a clause which treats amounts that would otherwise be a contribution as not being accepted if that amount would lead to a breach of the contribution cap. Under the proposal, a fund will be deemed to have accepted the contribution if the contribution has not been promptly returned and effectively been intermingled with other fund assets. This is designed to ensure that such clauses are ineffective and penalty contribution tax payable.
- Dependent spouse tax offset - Effective from 1 July 2012, the Government will phase out the dependent spouse tax offset (DSTO) for taxpayers with a dependent spouse born on or after 1 July 1952. The original phase out was for taxpayers with a dependent spouse born on or after 1 July 1971.
- Deferral of tax reforms – The commencement of the standard $500 pa work related expenses from 1 July 2012 will be deferred until 1 July 2013 and the standard $1,000 pa work related expenses that were to commence on 1 July 2013 will now not start until 1 July 2014.
- The commencement of the standard $500 pa work related expenses from 1 July 2012 will be deferred until 1 July 2013 and the standard $1,000 pa work related expenses that were to commence on 1 July 2013 will now not start until 1 July 2014.
- The 50% discount for interest income will be deferred until 1 July 2013
- The commencement of the phase down of the interest withholding tax for financial institutions will be deferred until 2014/15.
- Car fringe benefit rules – In the Federal Budget the Government announced a transitional period to move from multiple statutory rates to a single flat rate of 20% when determining the taxable value of car fringe benefits. This announcement will be modified to allow employers to elect to apply the 20% flat rate immediately rather than apply the transitional rules. This measure only applies to new contracts.
- Pause on Baby Bonus indexation – From 1 July 2012, the Government will pause the indexation of the Baby Bonus payment for three years. The payment rate will also be reset to $5,000 per child from 1 September 2012. The current rate of the baby bonus is $5,437.
- FTB Part A conditional on immunisation – From 1 July 2012, the Government will make payment of the FTB Part A supplement conditional on a child being fully immunised.
- Question from Lyn about withdrawing funds from superannuation to invest in property – When can I access my superannuation and How can I access my superannuation may be useful videos.
Call 1300 275 428
- Call 130 275 428 to leave your comment or financial question for Gavin to answer on the show.
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