Federal Budget 2013/14 – super highlights

Along with surpluses and schools, superannuation was front and centre of the debate in the lead-up to the 2013/14 Federal Budget. On the day, the demise of the Baby Bonus and the political debate over the deficit stole the headlines.

But the budget contained some important superannuation provisions, which if legislated, will have a real impact on how you save for retirement.

• Concessional contributions cap up to $35,000

If you’re approaching retirement, the limit on pre-tax contributions is increasing from $25,000 to $35,000 from 1 July 2013 if you are aged 60 or over, and from 1 July 2014 if aged 50 and over. This means you’ll be able to put more pre-tax money into super at the concessional 15% rate of tax.

• Excess concessional contributions taxed at marginal rates

If you inadvertently go over the pre-tax contributions limit, the government is proposing to reduce the tax penalty for excess contributions made from 1 July 2013. Excess concessional contributions will be taxed at your marginal tax rate, plus an interest charge, rather than the top rate of tax.

• Proposed taxation of pension earnings over $100,000

The government is proposing that from 1 July 2014 any earnings in pension age over $100,000 will be taxed at 15%, rather than be exempt from tax as present.

• Age Pension means test exemption for downsizing the family home

If you’ve retired, are over the Age Pension age, and you’ve owned your home for more than 25 years, you can take advantage of a new government trial designed to make downsizing the family home easier.

Under the three-year trial from 1 July 2014, older Australians who sell their family home will be able to put 80% of the surplus gain (ie after they have bought a new home) – of up to $200,000 – into a special account that will be exempt from the Age Pension means test for 10 years. Of course, conditions apply!

Super – still the one

This budget, like any other, contained a mixture of good news and bad news, depending on your personal circumstances. But one thing remains certain. Super is still the most tax-effective way to save for your retirement.

Earnings on super are still only taxed at super’s concessional rate of 15%. You can put up to $150,000 in after-tax concessional contributions towards your super, or $450,000 spread over three years. And you can still withdraw your money tax-free once you hit retirement on or after age 60.

Did you know?

Your first pay packet of the new financial year will contain a welcome boost to your retirement savings, as your employer superannuation guarantee payments increase from 9% to 9.25%.

This is the first regular annual increase over the next eight years set to lift the super guarantee to 12% by 1 July 2019.

If you’d like to know more about what the budget means for your retirement savings, call us, today on (08) 9315 4788.

What you need to know

Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. If you decide to purchase or vary a financial product, your financial planner, our practice, AMP Financial Planning Pty Ltd and other companies within the AMP Group will receive fees and other benefits, which will be a dollar amount and/or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.