Whether you are under 25, have a super account balance of less than $6,000 or have not made a contribution to your super account in 13 months you will no longer automatically receive life insurance cover through your super. Importantly, you will still be able to opt in to insurance cover through your super fund.
These changes are proposed to take effect from 1 July 2019 with members being given 14 months to then choose if they would like to keep the insurance they currently have.
The Government has proposed two new measures to tackle the impact of fees on super balances and make it easier for members to consolidate their accounts.
From 1 July 2019, exit fees will be banned and a maximum fee limit of 3% will be placed on inactive accounts with balances of less than $6,000.
The Australian Tax Office (ATO) has been given the power to automatically combine lost and inactive super accounts to prevent retirement savings being eaten away by fees.
Under the proposal, from 1 July 2019 if you have a super account that has not received a contribution for 13 months, with a balance below $6,000, it will be classified as inactive and transferred to the ATO. The ATO will then automatically match and combine these accounts with the member’s active account.
High-income earners with multiple employers will be protected from inadvertently breaching the annual super contribution limits. From 1 July 2018, individuals who earn more than $263,157 a year from multiple employers will be allowed to nominate wages from certain employers to be exempt from the Super Guarantee.
Under current rules, individuals earning more than this amount from multiple sources face a tax bill if they contribute more than the annual $25,000 limit.
The Government announced tax cuts for low and middle income earners that will commence from 1 July 2018.
If you earn:
This is the first stage of the Government’s three-stage plan to make the tax system fairer and ensure over 90% of working Australians pay a marginal tax rate of 32.5% or less by 2024-25.
If you’re aged over 50 and looking for work, the government announced it will pay a $10,000 wage subsidy to employers who hire older Australians to help combat age discrimination.
From 1 July 2019, if you’re retired and aged between 65 and 74 with a super balance below $300,000 you will be allowed to make voluntary super contributions for the first year that you no longer meet the work test requirements.
Currently if you’re aged between 65 and 74, to make voluntary super contributions you must work at least 40 hours in any 30-day period in a financial year.
The Pension Work Bonus currently allows pensioners to earn up to $250 each fortnight without reducing their Age Pension. The budget proposal will allow pensioners to earn an extra $50 a fortnight ($1,300 a year) from 1 July 2019 without reducing their pension payments.
The Pension Work Bonus will also be expanded to self-employed people who will be able to earn up to $7,800 a year, without reducing their pension payments.
The Pension Loans Scheme is a reverse-mortgage style scheme that allows retirees to release equity in their home to top-up their retirement income. The Scheme, administered by Centrelink, is currently only open to retirees who are eligible for a part Age Pension and is not widely used.
The Government has proposed extending the Scheme to all retirees, including full rate Age Pensioners and self-funded retirees.
Under this Scheme, from 1 July 2019 full pensioners will be able to increase their income by up to 150% of the Age Pension. This will enable single retirees who own their own home to increase their income by up to $11,799 a year and couples to increase their retirement income by up to $17,787 a year without impacting their eligibility for the Age Pension or other benefits.
From 1 July 2019, new Age Pension means testing rules will be introduced for pooled lifetime income streams. The rules will assess a fixed 60% of all pooled lifetime product payments as income, and 60% of the purchase price of the product as assets until age 84 (or a minimum of 5 years) and then 30% for the rest of the person’s life. This will mean people using these products will lose less pension entitlements.
The Government has proposed introducing a new framework for super funds to develop retirement income products that will help members achieve their retirement income objectives. The Government has committed to consulting with the super industry on this initiative shortly.
The Government has committed to funding an additional 14,000 home care packages over the next 4 years to help older Australians stay in their homes longer. The Government also committed $146 million towards aged care services in rural, remote and regional Australia and $83 million towards mental health services for nursing home residents to combat depression and loneliness.
* The changes listed are proposed by the Federal Government and are yet to be passed as legislation. Once the proposed changes are legislated the effect and scope of the proposed reforms may be different.
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