The Federal Government’s 2009 Budget includes some proposed changes to superannuation that may have an impact on some member’s savings plans over the next few years.
In summary, the relevant proposed changes are:
- Concessional contributions cap is reduced to $25,000 (or $50,000 if you are over 50) per year from 1 July 2009. This means employer and salary sacrifice contributions above that level may incur more tax and count towards your non concessional (after tax) cap. Some “grandfathering” provisions are proposed for members with a defined benefit (as at 12 May 2009) to ensure they are not adversely affected by the new rules
- Non-concessional contributions caps will not be indexed (i.e. increased) on 1 July 2009 but will stay at $150,000 (or $450,000 over 3 years)
- The co-contribution is being temporarily reduced from 1 July 2009 – so eligible people will receive a maximum of $1,000 as the Government co-contribution based on $1 for every dollar contributed
- Drawdown relief for income stream members is being extended to 30 June 2010 so these members can effectively halve the minimum amount they are required to withdraw annually (designed to lessen the effect of realising investment losses in the current market.)
- The age to qualify for the Government’s age pension will gradually increase to 67 years by 1 July 2023 and it has been proposed that the minimum preservation age for people is similarly increased
It is important to note that many of these proposed changes will be required to go through the normal legislative approval process, and may be subject to further modifications before becoming law. We will keep AvSuper members informed of progress.