Under the proposed changes to superannuation (note that these are only proposed changes announced by the Federal Government) the following areas might affect you. HIP will provide fact sheets and information on the HIP website once these proposed changes have been adopted. Salary Sacrifice The big change to superannuation is the halving in the maximum amount of pre-tax income that can be salary sacrificed into superannuation.
The annual limit on concessional super contributions will be halved from $50,000 to $25,000 for those younger than 50. For those aged 50 and older, the cap will fall from $100,000 to $50,000. The changes take effect from July 1.
Many people may want to make a lump sum contribution before June 30 to take advantage of the $100,000 limit for over 50s. In three years, the $50,000 limit for over 50s will fall to $25,000 to match the limit for under 50s.
These changes make it even more important to consider making a contribution this financial year and for the next three financial years.
The 9 per cent superannuation guarantee charge (SGC) is included in the salary sacrifice caps.
Co-contribution Scheme
The Government's co-contribution in the current financial year of $1.50 for each $1 contribution by the fund member will fall to a co-contribution of $1 next financial year. Those who meet the income test should try to contribute the maximum before June 30 to take advantage of the $1.50 co-contribution rate. You can download a HIP fact sheet on co-contribution or speak with your HIP representative for more information. Remember that payments need to be received by HIP days before June 30 to be processed this financial year. The scheme is means tested and the income limits for 2009-10, which rise each year with inflation, have not yet been released. But this financial year the full $1.50 is paid on contributions by those with annual total earnings of up to $30,342, which shades out at higher incomes and cuts out at $60,342. The maximum contribution from the fund member is $1000. The Government has described these changes as temporary and the limit will be partially restored to $1.25 in three years time and to $1.50 in the 2014-15 financial year.
Transition to Retirement
Transition to retirement strategies are unaffected by the budget other than the reduction in the maximum amount of pre-tax income that can be contributed to super.
A transition to retirement strategy is where those aged older than 55 can put all or part of their super into a non-commutable allocated pension and start drawing a pension while salary sacrificing a portion of their pre-tax income into super.
Because of the tax saved, the person may be able to reduce their working hours while maintaining the same income, or work the same hours while building their retirement savings. For many people the tax-free status of the earnings in the super savings is the main draw card.
The potential value of a transition to retirement strategy is more for those older than 60 because the income from the pension can be drawn tax-free.
Working longer
The qualifying age for the age pension is being gradually increased to 67. Men are eligible for the age pension from 65, while eligibility for women ranges from 63.5 to 65, depending on when they were born.
Under the changes announced in the budget, those born between July 1, 1952, and December 31, 1953, will have to wait until age 65.5 before qualifying for the age pension.
The qualifying age for those born later is stepped up in six-month increments. For those born on January 1, 1957 and later, the new qualifying age is 67. The Government has also increased the income level at which people can access the age pension so fewer of the well-off will qualify for a part-age pension and pensioner concessions.
Presently, provided they meet the assets test, a couple can have annual income of up to $72,423 before their age pension cuts out. From September 20 this year, that income level will be lowered to $59,228.
*Remember to make any co-contribution payments into your HIP account at least 5 working days before June 30, 2009 to participate in the current co-contribution scheme. If you have your co-contribution payments made through a salary packaging arrangement you need to check that your payments will be made before June 30, 2009. See the fact sheet available on the HIP website for more information.
Important: This information is of a general nature only about reported media releases by the Federal Government as at 3/6/09. It does not take into account your particular financial needs, objectives or circumstances. You should assess your own financial situation and read HIP’s Member Information booklet – Product Disclosure Statement (PDS) before making a decision about investing your superannuation. You may need to seek professional advice from a qualified financial planner. HIP accepts no liability should information regarding the Federal budgets be changed at a later date by the Government.
Dated June 2009, AFSL 247063, RSE L0001533, RSE R1056617
This website is provided by Private Hospitals Superannuation Pty Ltd ABN 59 006 792 749, AFSL 247063, RSE L0001533, Trustee of Health Industry Plan (SPIN HIP0100AU, RSE R1056617), and is general information only. It does not take into account your objectives, financial situation or specific needs so you should look at your own financial position and requirements before making a decision. Please note that investments can go up and down. Past performance is not a reliable indicator of future performance. You should assess your own financial situation and needs, read the relevant Product Disclosure Statement and consult an adviser if required before making a decision about products on this website.