Retirees are expected to benefit in several areas in Tuesday night’s Federal Budget.
The Australian Financial Review (AFR) reports that the downsizer scheme will be changed so that Australians aged 60 will be permitted to put up to $300,000 each into super from the sale of the family home. The current eligibility age is 65.
And the work test for self-funded retirees will be scrapped for those aged 67 to 74, enabling them to more freely top up their super.
“At present, this group has to be employed for at least 40 hours in a consecutive 30-day period in a financial year before they can make concessional or non-concessional (super) contributions,” reports Yahoo News.
Both measures to bolster retirement incomes will begin on 1 July 2022 and seek to assist older Australians “who did not have the benefit of a working lifetime of compulsory super contributions to bolster their savings”.
“We’re very conscious of giving retirees, including self-funded retirees, more control over their money,” Treasurer Josh Frydenberg told the AFR.
Since 1 July 2018, about 22,000 people have used the downsizer scheme, 55 per cent of them women. Three-quarters of those who used the scheme had less than $500,000 in their super.
Mr Frydenberg says the abolition of the work test will remove complexities around super top-ups and make flexible work more attractive.
“We want Australians to get the most out of their savings in retirement, whether that be through lower fees on their superannuation or more flexibility to make contributions,” he said.
The existing $1.6 million cap on lifetime superannuation contributions will continue to apply.
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The AFR says retirees have been negatively affected by a “sustained period of record low interest rates”, which are expected to remain for the foreseeable future.
Aged care funding could be almost double initial estimates, with some reports expecting the package could be almost $18 billion over four years.
“The government has only confirmed the package will be worth more than $10 billion over the forward estimates,” reports Seven News.
Finance Minister Simon Birmingham told ABC radio on Monday the government’s response to the aged care royal commission would be a “once in a generation investment”.
The commission estimated that one in three people living in aged care in Australia experienced neglect and physical or emotional abuse, ABC News reports.
“Australia spends about 1.2 per cent of its gross domestic product (GDP) on aged care. That’s less than half the OECD average of 2.5 per cent,” the ABC reports.
“A Grattan Institute report calculated the aged care sector needs an extra $7 billion a year just as a starting point.”
The Australian has made five predictions about other budget measures.
The Superannuation Guarantee (SG) will increase, as planned, from 9.5 per cent to 10 per cent.
Whether SG payments rise to 12 per cent by 2025 remains uncertain after fierce debate in coalition ranks about the future of such rises.
Higher tax-deductible contributions
“Australians can currently deposit up to $25,000 a year into their super and claim a tax deduction for it.
“These are known as concessional contributions, and the cap rises to $27,500 on 1 July.”
Another $10,000 to deposit
“Savers can also make after-tax deposits into their super, known as non-concessional contributions, of up to $100,000 each financial year.
“From 1 July this rises to $110,000 a year, and the rules allow two years of future contributions to be brought forward, giving pre-retirees the ability to pump in $330,000 in one splash.”
Bigger tax-free retirement pensions
Retirees will be able to put up to $1.7 million each in a personal account-based pension, up from $1.6 million. These amounts are tax-free for most people.
Insurance and fees
Premiums are tipped to rise, particularly on life insurance in their super, because of increased regulation and the impact of the pandemic.
Consumers are advised to check their fees and make sure they don’t pay more than one per cent in total fees.
Will these predicted Budget announcements help you? Does the work test change make sense? Will it encourage you to work part-time a little longer?
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