Will your super be worse-off?

The much-hyped changes to superannuation

Will your super be worse-off?

On Friday, Treasurer Wayne Swan and Minister for Financial Services and Superannuation, Bill Shorten, moved to end damaging speculation over the much-hyped changes to superannuation. Most of the changes may never actually be legislated, as it is unlikely the Government will be able to put the legislation through Parliament before the important 14 September 2013 election.

It is worth noting that not all measures announced on Friday will result in financial loss for those with superannuation savings. The majority using superannuation as a tool to fund retirement will see net benefits over the coming years. A breakdown of the main changes is as follows:

  1. Income from superannuation account-based income streams will be subject to standard deeming rules under the income test for Age Pensions from 1 July 2015.
  2. Earnings of $100,000 or more from super assets will be taxed at 15 per cent for every dollar over that threshold. Currently, based on a return of five per cent, this will affect only 16,000 people.
  3. For those over 60, the tax-free concessional contributions to superannuation will increase from $25,000 to $35,000 for those over 60 from 1 July 2013 and for those over 50 from 1 July 2014. There is also a plan to increase the level of concessional contributions to $35,000 for everyone from 1 July 2018.
  4. Those with notional earnings of more than $100,000 from a defined benefits fund will be taxed at 15 per cent for every dollar over that threshold.
  5. From 1 July 2013, f you accidently pay more than your allowed contributions to super in any year, you can withdraw excess contributions. These excess contributions will only be taxed at your marginal tax rate, rather than the current 46.5 per cent.
  6. The balance threshold at which inactive superannuation can be transferred to the Australian Tax Office will rise from $2000 to $2500 from 1 December 2015 and $3000 from 1 December 2016.
  7. A Council of Superannuation Custodians will be established.

These changes, if implemented, should encourage a review by every Australian of their individual superannuation arrangements, which is something that should be undertaken periodically.

Watch Minister Bill Shorten discuss the changes on ABC News. 

Read the full announcement on the website of the Minister for Financial Services and Superannuation.

Opinion: The wrong focus

While superannuation reforms of some description were expected, the timing of the announcement was in direct response to statements by back-bench renegade Simon Crean.

These reforms may never see the light of day, but fund managers say certainty has now been restored. Met with political and media cynicism, there have been claims that the reforms were to boost the Government’s bottom line pre-budget, but with the reforms bringing minimal savings and the timing, it seems unlikely that this is the case.

The announcement was met by the typical screaming headlines, such as ‘Grab for your superannuation’ and ‘Superannuation funds raided’, however, this is far from the reality.

The average superannuation balance of an Australian aged between 60 and 64 is approximately $198,000 for men and just $112,000 for women (source Challenger Retirement Income Research, April 2012). Therefore, for politicians and media to claim that the super funds of average Australians are being ‘raided’, by taxing those who have an annual income of $100,000 or more from super assets, is simply ridiculous. The changes will affect 0.4 per cent of the tax paying population, 16,000 of the country’s highest earners. Arguments have been tabled that these figures are modelled on a return of five per cent on investments and that if (a big if) these returns reverted to pre-GFC levels of 10 per cent, then 126,000 people with super balances of $1 million would be affected. Still not your average Australian.

Tony Abbott’s response was, "Every time a government raids people's funds there are shades of Cyprus about it''. This from the man who has clearly stated that he will repeal the tax benefit to low-income earners, which amounts to an extra $500 in superannuation for those earning less than $37,000. Doesn’t really seem fair, does it?

However, it’s not just the super-rich who should be hoping these reforms never come to fruition. Buried in the detail of the reforms is the shocking news that the likelihood of claiming an Age Pension is about to diminish. Currently, income from superannuation account-based income streams receives concessional treatment, but for all new products commenced after 1 July 2015, standard deeming rules will apply. This means that the income limit may be exceeded. Although those who currently have such income streams will have their concessions grandfathered indefinitely, they will not be able to change products.

Also, it’s now time to search for your unclaimed super, with the announcement that the threshold balance for inactive super accounts will rise.

Do you think these changes will be implemented by the current Government? Will they affect your retirement savings?





    COMMENTS

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    Paulo
    8th Apr 2013
    11:49am
    Typical beat up from the Murdoch Press and that useless bigeared pretender to the throne Mr Rabbit. When is the media going to revert to clear unambiguous reporting and stop the complete negative campaign against the government. Remember it is the people that elect the parliament and the parliament that agrees (by whatever minority) to who governs. Stop the Bullshit
    sanity
    8th Apr 2013
    12:39pm
    Govt can't resist seeking easy ways to get extra taxes. It's just unfortunate that those who took up the process of being self sufficient will again come up 2nd best. 12 years ago I had virtually nothing in my super and it was being eroded by fees quicker than funds were going in. So I started my own SMSF. Working 2 jobs, saving, saving, saving and putting everything I could into super (up to the limits) I now have a fund which I can manage to produce income of about $160K (or about 10%+) of the balance. So why should I be penalised - I paid 15% going in, the SF paid income tax on earnings prior to my retirement. This now becomes double taxation. Can I afford to pay it - YES. But why should I have to? I made my decision - others have made theirs (spend as you go).
    Gillard has bankrupted this country with her crazy spend schemes. How about they attack those you don't want to work and get them off the public purse!
    Tom Tank
    8th Apr 2013
    1:03pm
    You should recognise the massive tax savings you were given in accumulating that amount in your super fund. The rest of Australian taxpayers actually subsidised your super fund so you have had breaks there that most of us did not have the opportunity to access
    Nan Norma
    8th Apr 2013
    1:38pm
    It sounds as if you've spent your whole life working and saving for your retirement. I honestly don't wish to be rude, but you seemed to have forgotton to live. You may well be too sick to enjoy your money in the end.
    niemakawa
    8th Apr 2013
    4:39pm
    I have to agree with your comments. You have tried to save arduously for your retirement years but the Government now wants to double "dip". You were and still should be entitled to the same tax concessions as everyone else regardless of income, lifestyle. Tom has probably overlooked the possibility that you have subsidised him in many other ways through your working life, so he should not really complain. Unfortunately people like you are rare, whilst the majority of those that have not committed to providing for their own retirement, at least in part, will continue to rely on the Government pension. Then they will be "upset" at those that have accumulated enough to remain independent of financial assistance from the Government. Good luck to you.
    China
    8th Apr 2013
    2:05pm
    Is your Superannuation taken into account by Centre Link when assessing how much pension you will receive ie, Is it classed as an asset. ?
    Tom Tank
    8th Apr 2013
    2:30pm
    Yes your superannuation is taken into account when assessing your pension
    princess
    8th Apr 2013
    4:09pm
    Could not agree with you more Sanity. You have made the effort to do the right thing.
    Robbie
    8th Apr 2013
    5:00pm
    It saddens me to hear Tony Abbott say anything, to any-one at any time with so little factuals truths in doing so. 'Shades of Cyprus' when speaking of the Superanuation debate. Frightening old people for political gain, whilst not mention his plan to cut superannuation concession to 3.5 million old people on the lowest table whilst proposing tax consessions for those on the highest. Will the media (not much luck there) ever hold him to account? People should take a good hard look at this man' ambition to the top job and the lack of honesty, credibility & truthfulness he brings to the table. Can Tony Abbott convince Australians to let him have 'the Lodge' simply because he is not Gillard, or does he actually have something to offer the Australian electorate besides this approach?
    Paulo
    8th Apr 2013
    6:13pm
    Tony Abbot will reap what he has sown. He has made politics such a hateful experience from his parties intransigence opposition to absolutely everything, that will be returned to him in spade if we are unfortunate to elect him. Australia sits about the second best country in the world in economic and life style considerations but if you listened to him and his cronies we are down there with Cyprus. What a joke this man is, but it is not funny. The media has never put him under scrutiny or hardly question his judgement in punching walls, sexual liaison whilst a trainee priest and so he won a Boxing Blue, how many and who did beat in the ring. Julia would make mincemeat of him over two rounds.
    Airborne One
    8th Apr 2013
    9:17pm
    Opinion: The wrong focus.

    Well, before we all go running around crying wolf etc, about this type of story creating the wrong focus, allow me to tell a story (fact) about what happened to my super, due to a PM, his name doesn't matter, however he was sacked by a Mr Kerr.
    Just a little background on my subject. Myself and about 50,000 - 60,000 other Defence Force Personnel in the 60,s through the 70,s were forced to join Superannuation Scheme (and that word was well suited in the end), no choice at all. It came out of our pay after tax's of course. This Scheme's input (there's that word again) was never to be touched by the Government (regardless of whom at the time) and the Service person could only access it after 20 yrs.' of full time service. I joined at 21years of age, served 21 1/2 yrs.', so hey What am I going to do with all the moola I am going to get? sit back and take it easy, you say? well it didn't work like that, because the DFRDB and DFRB schemes (again) were not linked to the average male take home pay, it was linked to the CPI. Now that we are fighting to get our fairness rectified, the Government is screaming poor, we can't fund that and that was supposed to be set up to rise with the above take home pay. Now we get to the question at hand, "WHAT HAPPENED TO ALL THE DOLLARS PLUS THE INTEREST GAINED THAT THE DEFENCE FORCE PERSONNELL HAD BEEN FORCED TO PAY INTO THAT (here it is again and it sure as hell was one) SCHEME" , well no one seems to know which party got their hands on it, but to cut a long story short, it probably went overseas in aid to Vietnam, Indonesia, you name it.
    So hey, don't ay that the spin doctors are giving you the wrong impression/focus, they (the Government, can and will rip you off (as quick as a wink) and go home and have a good nights sleep. They tell us that they can not fix the deficit that they caused us, but, continually throw Billions (had to look up how much this meant in dollars) of OUR Dollars over seas to corrupt Governments (officials/who ever) and these ILLEAGLE BOAT PEOPLE and again still sleep well and as for the troops Stiff Faeces.
    So my advice to you is, if they did this to people who "wrote out a blank cheque payable to the Government even if it meant their life", what chance do you have????????
    I you think I am feeding you Bull Faeces, ask a Politician or an old soldier and if you think we are far better off than you, ask yourself, why are so many are carrying injuries and still so young? Simple answer is it is no walk in the park trying to stop yourself from meeting your end prematurely. And just as a by line I tried abbreviating Government with Govt , I think this computer has a better understanding than I do of Politicians, try it and see what comes up as a replacement for it.
    Above all else, have a nice day
    Flotsam
    9th Apr 2013
    8:52am
    Same old story. Never let a Bureaucrat or Politician get anywhere something important.
    Flotsam
    9th Apr 2013
    8:53am
    Same old story. Never let a Bureaucrat or Politician get anywhere near something important.
    (sorry missed a bit, old timers again)
    Airborne One
    9th Apr 2013
    9:58am
    Not wrong there buddy, do I sniff an ex Pussa in the wind?
    Paulo
    9th Apr 2013
    10:08am
    Dear AIrforce One, if we are to divert attention from misreporting or under reporting or unreasonable bias in the media then let us the common people tell the true full story. DFRDB was a compulsory scheme but WAS NOT a fund. The effective salary sacrifice we service men paid (5.5%) of our pay was returned to general revenue not invested in any fund, so it earned no interest and the payments to recipients is paid out of general revenue. But I do agree that the payments should be indexed the same as the politicians and age pensioners.
    Renny
    9th Apr 2013
    10:15pm
    I'm annoyed that both sides seemed to have missed the fact that many blue collar workers are in the same or worse position as women. We grew up expecting to get the old age pension and then it all changed. My spouse is already 66 and because I'm 58 it's quite possible that he will die before I can afford to retire. Ve supported him for eleven years when he would otherwise have been on a disability pension and get a measly $2300 back on tax. I think we baby boomers (or silent generation as I'm apparently part of now). Have been sold a pup. I don't care how much they tax people who are making $100,000 from their super. These are the same people who have been able to minimise their tax most of their lives leaving us working folk to pay it for them. Having worked since I was 16 I'm hoping I get to spend at least a couple of years retired WITH my husband. It's seeming less and less likely and if Abbott gets in ill probably be working like my grandfather did till I'm eighty. So much for progress Australia.
    jfonshea
    10th Apr 2013
    12:21pm
    just heard a comment on my business day on 4bc.. re changes to super in 2015 in regards to deeming changes on allocated pensions.. depending on what your drawdown is some people could end up with no pension at all... am i reading that right.. surely they couldnt getaway with that and im talking about people who have struggled to get maybe 300,000 in super and will be looking to take out an allocated pension.........john 12.20 10th april 2013
    China
    10th Apr 2013
    1:11pm
    In reply to jfonshea, yes, you are correct,it is their way of reducing the number of people getting their full pension when they reach pension age. in other words, you can pay into a superannuation scheme all your life, then when you reach pension age, your super is classed as an asset,thus reducing your pension to an amount which will depend on how much super you have. This is happening to me now. I only get approx one half of the pension mainly because of my super. So it begs the question, why have super in the first place. So yes, they are getting away with it.
    Paulo
    10th Apr 2013
    9:34pm
    There is so much ignorance regarding the age or service pension (not to be confused with DFRDB Pension)

    NOBODY in Australia pays into a government pension fund and it is paid out of general government revenue.
    The Government over the years has determined that if you earn enough from you investments or have to many assets then you may not be eligible for those pensions. For the British retirees among us (whingeing pomms) there is no automatic right to the Australian Pension unless you need it because of your low income, unlike UK where every millionaire draws their Old Age Pension. Get the facts right!
    Airborne One
    10th Apr 2013
    10:39pm
    Bad choice of words there Paulo, me old matey.
    DFRDB and DFRB are not Pensions, they are Super payments, or whatever you want to call them other than a Pension.
    DVA Payments, i.e. Invalidity payments, up to and including TPI are also not a pension, they are Compensation Payments, simple as that.
    However when it come to Centre Link they are taken into account and income even though they are not taxed (TPI) and the Comsuper payments are also not taxed after a set age?
    We are paying more tax's every day and mostly to fund pie in the sky idiotic day dream floating out of the ACT. Three tiers of Govt is 1 maybe 2, to many, so where does it all end?
    And if people think they are safe with a super nest egg, the they are in for a shock, once it is tied up the greedy buggers in the bean shop can get their grubby little hands on it. Look at the Bank Accounts that are inactive for more than three years, thankyou very much says the grubby little bean counters that are in the office of the Lame Duck next to the never been elected PM.
    Have a good day now and keep the purse string tightly tied.
    Crazy Horse
    16th May 2013
    12:22am
    Do you people ever st whinging? From what I can see the changes in the Budget are mostly positive for older Australians. What about being able to invest $200,000 resulting from downsizing your home after the kids have left? Sounds good to me.

    I agree with the comments re the media. What I want is objective reporting of the facts so I can make up my own mind, not blatantly partisan campaigning as we have seen in recent times.
    Airborne One
    16th May 2013
    12:43pm
    Fair comment Mad hoss, even though your comment is a month or more behind the rest.


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