The recent Budget announcements by our current government may have happened in the blink of an eye, but can serve to have far reaching consequences on many. Overall the Federal Budget was a solid effort, with the focus on getting the country to live within its means by cutting $34 billion and returning to surplus. However, if you are in small business, or big business, or approaching retirement, you have been slugged.

Superannuation, in this budget, has been used as a ‘cash cow’ to be milked to meet deficits. The government has again confirmed that it is willing to use retirement savings to pay for other political objectives. This is the ninth time since 2008 the government has changed the rules, equating to $7.8 billion less in retirement savings. These are the same politicians that have avidly stated that our superannuation system is wonderful and allows us to save for our own retirement so as to take the pressure off government age pensions. The message is being sent that super savings are at risk from constant government tinkering.

The budget announced that the start date of the higher concessional contributions cap measure would be deferred by two years, from 1 July 2012 to 1 July 2014. This two year deferral means that Australians will only be able to make concessional contributions of up to $25 000 per year. The original proposal would have allowed individuals aged 50 and over, with an account balance less than $500 000, to contribute up to $50 000 in concessional contributions. It is worth remembering that three years ago this contributions cap was $100 000 for an individual aged 50 or over. The cap has effectively been reduced by 75%. This reduction, and subsequent deferral, could be a huge disadvantage to Australians aged over 50 who are trying to save for retirement.

Although disappointing, such a deferral is understandable based on the administrative complexities of introducing the new cap in the original time frame. The government has estimated that the savings resulting from this amended cap are worth $1.46 billion over two years, which equates to approximately $8.5 billion less in savings for retiring Australians.

The message from this budget announcement to everyone, especially those aged 50 and over, is to carefully watch your salary sacrifice arrangements. The $25 000 contribution limit includes superannuation contributions your employer makes on your behalf as part of their 9% Super Guarantee obligations, together with any salary sacrifice arrangements in place. The table below shows how much you can salary sacrifice at various income levels after taking into consideration employer super guarantee:

Before considering any salary sacrifice strategy, it is important to take into account other income, if any, to ensure you meet your objectives for income and tax. If you are expecting a salary increase or a change in employment during the year, this could affect the total amount you contribute.

Standard excess penalty tax will apply for concessional contributions exceeding the $25 000 per annum limit. That is, 31.5% tax will be payable in addition to the 15% contributions tax on all concessional contributions made during the year. This could negate any tax benefits you may receive via your salary sacrifice strategy.

The government also announced that from 1 July 2012, the tax on superannuation contributions by individuals with income greater than $300 000 will double from 15 per cent to 30 per cent, excluding the Medicare levy. Although this is only designed to impact on a little over 1% of the population, it can act as a further disincentive to save for retirement.

Legislated superannuation changes announced prior to the budget but mentioned in the budget include:

* Superannuation Guarantee (SG) contributions and eligibility. Currently employers are obliged to make contributions of 9% of an employee’s salary to superannuation where the employee is under age 70. Legislation has now passed to increase the SG rate from 9% to 12%, in incremental stages, by 2020, effective 1 July 2013. The eligibility age for employer SG contributions will be abolished from 1 July 2013. In other words, SG contributions will extend to all workers regardless of age. The intention of this change is to provide an incentive for older working Australians to remain in the workforce longer.

* Effective 1 July 2012, a contribution rebate of up to $500 (not indexed) will be payable to workers with adjusted taxable income of less than $37 000.

* Individuals may be eligible for a refund of excess concessional contributions of $10 000 or less in a year, commencing this financial year 2011/12. This relief is available as a ‘once-off’ option and only where the individual has not previously exceeded the concessional cap.

* The Government has announced it will reduce the matching rate and maximum payment of the co-contribution payment from 1 July 2012. The matching rate for the existing co-contribution is to reduce to 50%, with the maximum co-contribution payment reducing from $1000 to $500 for those people who earn less than $31 920. The cut out threshold will also reduce to $46 920 from $61 920. Accordingly, this is the last financial year to access the higher $1000 payment.

Australians are arguably becoming wary of the superannuation system given the myriad of changes over the past five years. While the changes to superannuation have been widely discussed over recent years, three out of four people still do not fully understand the changes, nor what impact these changes will have on their personal situation. The amendments to superannuation are far reaching. They affect not just pre-retirees and retirees, but a wider age group of people who may be thinking about how superannuation could suit them, or even whether they should make additional contributions to superannuation at all.

To make sure you fully understand how these changes can impact on you personally, feel free to make an appointment with one of our specialist staff to discuss your situation.

Superannuation - Keeping the Faith with Kymberlee Naumann - Power Tynan Superannuation Solutions 

The 2012/2013 Budget was handed down on 8 May. The Budget was fiscally tight, designed to return the Budget to surplus. The budget contained many anticipated changes to superannuation, however the inclusion of some surprises along the way made for some interesting reading. The following is an overview of some of the major changes:

From the 2012/13 financial year, the tax-free threshold increases to $18,200. With the inclusion of the low income tax offset of $445 means you will be able to earn up to $20,542 before any income tax is payable.

• Net medical expenses tax offset has been amended to introduce a means test. Currently a 20% tax offset is available for net medical expenses in excess of $2,060. From 01 July 2012 individuals earning more than $84,000 and families earning more than $168,000 will have to incur more than $5,000 net medical expenses in order to qualify and the tax offset rate will reduce to 10%. • Mature age workers tax offset will be phased out for taxpayers born on or after 01 July 1957. • The Education Tax Refund will be replaced from 1 January 2013 by the ‘Schoolkids Bonus.’ The new Schoolkids Bonus will pay eligible families (receiving Family Tax Benefit Part A) $410 per primary student and $820 per secondary student. The bonus will be paid as a lump sum in January and July each year. • In relation to the above, the Education Tax Refund for June 2012 will be paid in full as a lump sum to eligible families in June (no receipts are required). • Standard deduction for work-related expenses announced in the 2010/2011 Budget will not proceed.

• The proposal to reduce company tax rates from 30% to 29% will not proceed. • From 30 June 2013, companies will be entitled to carry back up to $1 million in tax losses incurred in the 2012/2013 financial year to be offset against tax paid in the 2011/2012 financial year. From 30 June 2014, companies will be entitled to carry back and offset against tax paid in the previous two years. Essentially there will be a refund of tax paid in those previous years.

• The threshold for the small business asset instant write-off will increase from 1 July 2012 from $1,000 to $6,500. • Small business will be eligible for an immediate write-off of $5,000 on new motor vehicles purchased from 1 July 2012. The balance of the motor vehicle will be depreciated with other small business assets in the pool at 15% in the first year and 30% after that. • The entrepreneurs tax offset has been removed from 1 July 2012.

• For the budget changes relating to superannuation please consult Kymberlee Naumann’s article entitled ‘

If you have any questions in regards to any budget changes or announcements, please feel free to contact the office and one of our staff will be able to assist.

2012/2013 Federal Budget with Brad Hancock 

Given the world, and even some local events, that have occurred during 2011 it is probably little wonder that when it comes to business and financial matters many people are feeling less than confident. The United States economy has been struggling and the sovereign debt issues that have been plaguing Europe combined with the natural disasters that have rocked Japan and New Zealand mean that from a global perspective, 2011 has certainly been a challenging year. At a domestic level there have been the natural disasters of last summer, a State government that has been less than convincing and a minority government at Federal level. It seems that around every corner there is another testing situation that shakes both our resilience and our confidence.

Superannuation - Keeping the Faith with Kymberlee Naumann - Power Tynan Superannuation Solutions

2012/2013 Federal Budget with Brad Hancock

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