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Mid year economic forecast

by Meg Heffron

There wasn’t much ‘new & exciting’ news in this for SMSF members and trustees:

  • The information on the Low Income Superannuation Contribution (a special extra Government contribution a bit like the co-contribution for certain people who are working but earning less than $37,000) essentially replicated the draft legislation we already have
  • the removal of any upper age limit for Superannuation Guarantee contributions had already been flagged in a press release last month and is actually already well on its way to becoming law. (This was discussed in a previous post where I highlighted that legislation had been put to the House of Reps to increase the upper age limit from 70 to 75.  That legislation was amended in the House to remove the age limit entirely and the new version is now in the Senate.)

What was new (but perhaps not exciting) is that the Government Co-contribution is to be halved (effectively the Government’s matching of the individual’s own contributions won’t be as generous). 

Equally dispiriting – indexation on the $25,000 concessional contributions cap is to be deferred for a year.  Normally this would have increased to $30,000 in 2013/14 as the rules for this limit are that it is indexed to Average Weekly Ordinary Time Earnings but only in $5,000 jumps. We were finally due for a jump.  This cap flows on to all sorts of other limits – for example:

  • the limit on non-concessional contributions is 6x the concessional contributions cap (so it will also stay at $150,000); and
  • the proposed new limit for those over 50 who have less than $500,000 in super is the concessional contributions cap + a fixed $25,000

Perhaps the only thing to get remotely pleased about is the fact that the Government has decided to extend the temporary reduction in minimum pension payments for yet another year.  For the three years up to 2010/11, members drawing account-based and market linked pensions were only required to take 50% of the “normal” minimum pension.  This year (2011/12), they are only required to take 75% of this “normal” amount.  That was due to stop next year and we were to see a return to 100% levels at 1 July 2012.  Instead, the 25% reduction (meaning members are only required to take 75% of the “normal” rate) will continue for one last year (2012/13) and we will return to the normal rules from 1 July 2013 (maybe – who knows – this concession has now dragged on for five years, perhaps we’ll never go back to “normal”).

So nothing terribly exciting or imaginative.  But hey – I’d still rather be saving for my retirement in Australia than Europe.

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