Budget Update 2011

The Federal Budget was announced on Tuesday 10th May 2011.

The Budget outlines all major Government initiatives, reforms and programs including the economic outlook for Australia. It includes proposed legislative changes and updates to topics including tax, superannuation and pensions.

The 2011 Federal Budget focused on savings and bringing the economy ‘back into the black’ by 2013. Some proposed superannuation and pension reforms were detailed. These have been outlined below:

SUPER

  • Co-contribution - The Co-contribution threshold figures will remain at their current levels (income of $31,920 for the full co-contribution and a reducing scale to the maximum income of $61,920) until the 30 June 2013.
  • SG Payment Notification - From 1 July 2012, Employers will need to provide information regarding Superannuation Guarantee (SG) contributions on staff payslips. Also, Members and Employers will receive quarterly notification from a super fund if payments cease. This will help members track their employer’s contributions and take action where there is a shortfall.
  • Concessional Contribution Limits – Members Concessional contribution (SG and salary sacrifice) limits will remain at $50,000 annually for members over 50 years of age where their total super balances are less than $500,000. The Government is yet to clarify how the $500,000 total super balance amount will be determined.
  • Exceeding Concessional Contribution Limits – Members who have exceeded their concessional contribution (SG and salary sacrifice) limits by up to $10,000 in the first year of excess, can request to have the excess contributions of up to $10,000 refunded to them. This is only available for a member for their first breach and only applies to contributions received after 1 July 2011.

PENSION

Phasing out of temporary minimum pension drawdown by 2013 - The temporary minimum pension drawdown available to members over the last three years will be amended to 25% of the standard drawdown amounts for one year.

New table effective for period 1 July 2011 to 30 June 2012

Age at 1 July

Standard

Pension Drawdown

New temporary drawdown for 2011/12

Under 65 years

4%

3%

65 to 74

5%

3.75%

75 to 79

6%

4.5%

80 to 84

7%

5.25%

85 to 89

9%

6.75%

90 to 94

11%

8.25%

95 or older

14%

10.5%

From 1 July 2012, the standard drawdown amounts will apply, unless changed in the May 2012 Commonwealth Budget.

Note: these proposed Federal Government reforms will only become valid if they are passed into law. Please visit www.budget.gov.au for further updates.