The government has announced a raft of superannuation changes, including the abolishment of the $450 threshold and a super savings booster for retirees.
The Treasurer used his budget speech to highlight how workers will be better off under the new proposals that include the abolishment of the $450 threshold and super boosts for older Australians.
Abolishment of the $450 threshold
Treasurer Josh Frydenberg has scrapped the $450 a month threshold beyond which employers are obliged to pay super, helping to boost the retirement income of thousands of part-time workers.
The measure will have effect from the start of the first financial year after Royal Assent of the enabling legislation, which the government expects to have occurred prior to 1 July 2022.
The changes have been praised by women’s groups as the threshold causes almost twice as many women as men to miss out on super contributions when working in part-time roles.
“On average, women retire with less superannuation than men,” the Treasurer said.
“So, tonight the government will remove the current $450 per month minimum income threshold for the superannuation guarantee.
“This will improve economic security in retirement for around 200,000 women.”
Super savings booster for retirees
The eligibility criteria for the government’s existing downsizer scheme (introduced in the 2017 budget) is being expanded to include Australians aged 60 years and over.
The scheme, which allows participants to make a one-off $300,000 contribution to their super, was previously only available to Australians aged 65 years or older.
“We will allow those aged over 60 to contribute up to $300,000 into their superannuation if they downsize their home, freeing up more housing stock for younger families,” Mr Frydenberg said.
Increasing the First Home Super Saver Scheme
The government has also announced an increase to the First Home Super Saver Scheme (FHSSS) from $30,000 to $50,000, as of 1 July 2022.
Voluntary contributions made from 1 July 2017 up to the existing limit of $15,000 per year will count towards the total amount able to be released.
The increase in maximum releasable amount will apply from the start of the first financial year after Royal Assent of the enabling legislation, which the government expects will have occurred by 1 July 2022.
This measure will ensure the FHSSS continues to help first home buyers in raising a deposit more quickly. This measure is estimated to decrease the underlying cash balance by $25.0 million over the forward estimates period.
Stronger consumer outcomes
The government will provide $11.2 million over four years from 2021-22 (and $3.1 million per year ongoing) to support stronger consumer outcomes for members of superannuation funds by providing:
• $9.6 million for the Australian Prudential Regulation Authority to supervise and enforce increased transparency and accountability measures as part of the government’s Your Future, Your Super reform
• $1.6 million to Super Consumers Australia to support stronger consumer outcomes on behalf of superannuation fund members. The funding for this initiative will be partially met through an increase in levies on regulated financial institutions.
Improving the Pension Loans Scheme
The Treasurer confirmed the government is increasing the flexibility and attractiveness of the Pension Loans Scheme (PLS) for senior Australians.
From 1 July 2022, the government will introduce a No Negative Equity Guarantee for PLS loans and allow people access to a capped advance payment in the form of a lump sum.
The PLS is a voluntary, reverse mortgage type loan available to assist older Australians who wish to boost their retirement income by unlocking equity in their real estate assets.
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Article by Cameron Micallef on May 11, 2021 – nestegg.com.au