Morrison Focuses On Dependence in Age Pension, Not Superannuation Based On Budget 2017

Superannuation is not going to take the place of the pension in the near future based on present policy conditions.

The time that superannuation creates a lot of pathways towards the age pension expense appears as distant like never before. Papers on budget reveal the age pension, the largest element of welfare cost in Australia, is going to develop with increasing success. The same goes for the tax concessions expenses on superannuation. The good news is that by 2020-21, total monetary funding for the two elements of the retirement earnings scheme is anticipated to reach the cost of around $95 billion in comparison to just below $76 billion in 2016-17.

In the more recent years, governments have made measures to regulate the increase in this number. In spite of this, the papers on budget foresee that expenses on the age pension are going to total $52.3 billion in 2020-21, a significant increase from $44.7 billion in 2016-17.

Overall help for the elderly, not including superannuation, is anticipated to increase to $74.8 billion in 2020-21. On the other hand, total monetary help for the non-working and the ill is seen to increase starting from $11 billion to $12.5 billion during the same time span.

Major Superannuation Changes It Made

During the first few decades, a few financial consultants gave warning to clients who would get rid of the age pension in the coming years, so they need to channel cash into things which the consultant simply chances to have with him – like superannuation or investment assets. Nowadays, the superannuation department is looking forward to the age pension as a long-term component of the welfare scheme which could increase the value of a somewhat minute Pension granted from superannuation.

According to the papers on a budget, the age pension is the main factor of development over the forward projections in the overall help to the elderly (not including superannuation). It is projected to increase by only 0.1 percent in real terms during the whole duration of 2017-18, but around 7.7 per cent in real terms for the coming three years. This is even in the face of the incremental growth now happening for the worthiness of pension age starting 65 to 67 in a move to reduce the speed of the growth in expenses.

The fiscal situation is no better for superannuation. The conservative "revenue gain" of Treasury is a benchmark of the expenses of concessions in tax for superannuation reveal that this monetary import is rising a lot quicker than the age pension. Based on this conservative move, the expense is projected to increase by $11.7 billion between 2016-17 and in 2020-21 to $43 billion. This measures up to the $7.8 billion increase in the age pension to $52.3 billion during that time. The combination of amounts in 2020-21 is more than $95 billion for superannuation and the age pension.

Sadly, Treasury's gain of earnings technique disregards the cost since it presumes that your entire voluntary superannuation donations are going to other taxed privileged investments, not including the concessions. This is not very likely, granted Australians' well-rooted eagerness to place cash into non-tax privileged assets.

Require Superannuation Continues To Pose a Dilemma

The Labor leader Bill Shorten's budget response message last Thursday made a position which is in contrast with his non-stop accountability towards decreasing worker’s net earnings by raising required super donations starting from 9.5 per cent of earnings to 12 percent. With the exclusion of higher salary earners, the speech repelled the government's 0.5 percentage point increase in the Medicare levy. According to him, "If the growth of earnings is anaemic, Labor could not assist in convincing individuals on standard earnings surrender something extra of their pay packets."

What does he reckon Labor's significantly larger raise in required superannuation donations is going to do to their pay packets? Even in the face of repeated claims of being on the side of low and middle salary earners, Labor has a hard time welcoming the fact that superannuation hurts present standards of living for these workers. Somehow, it also disrupts the distribution of benefits away from higher productivity clusters towards the hands of the fund supervisors.

The question which remains then is what action could be taken to change the fast increase in the expense of the concessions? The most financially viable solution is to change required donations into a standard portion of net income. This is going to let individuals make decisions on their own and for their sake about the amount they have to apportion to items like paying a mortgage off and raising a family as opposed to retirement savings. All donations to superannuation will then have to originate from post-tax earnings, providing a $15 billion increase to the overall budget in 2017-18. More significantly, it is going to raise expendable earnings to no small degree without additional expense to employers and finally lay to rest Scott Morrison's worry about the effects of the slow increase of wages.

More on the Age Pension in Australia

The process of applying for an Age Pension in Australia can be daunting. First of all, to be able to make a claim for an age pension, you need to have reached the eligibility age which is currently 65 years of age. From 2017, this will gradually rise until it reaches 67 years of age until 2023.

There are also eligibility rules surrounding age pension, which usually require you to have lived in Australia for 10 years before claiming. However, you should confirm your individual circumstances with Centrelink.

When it comes to assessing your eligibility for an age pension, income, and an asset test are both applied. Under the income test, your pension is reduced by 50 cents for every dollar you exceed the threshold.

Centrelink has clear definitions of what is included in the incomes test. And this can include income from investments, rental property, and salary. The value of the assets you hold could also impact the amount of age pension you receive. With your pension being reduced by $1.50, for every 1,000 dollars you exceed the asset threshold.

The good news is that your principal residence, should you own it, is excluded from the assets test and as a general rule, any money owning on an asset will also be taken into consideration when applying a value.

Centrelink also has a clear definition of what is included under the asset test. And this can include a car, investments, and household goods. Once you are granted an age pension, the payment rate is calculated by applying the income and assets test. Your pension entitlement is based on the lower of the two.

The rate you’d be paying includes the basic pension rates as applied to a single applicant or a member of a couple, plus the pension supplement, which is designed to cover utility costs. An energy supplement is also paid to recipients of an age pension.

The age pension payment and pension supplement are indexed twice a year – in March and in September. However, the energy supplement is not. Of course, retirement doesn’t always mean giving up work altogether. Many of us will choose to continue working past the traditional retirement age, either through the need to keep active or financial necessity.

The good news is for those who choose to keep working; the first $250 of income per forth-night is excluded from the income test. And if your employment is seasonal, you can bank this allowance to a maximum of $6,500 to use when you earn reportable income.

Even if you received just $1 in age pension, you would receive a pension concession card. And one of the greatest benefits of holding this card is the access to reduced cost medicines, state, and territory, and governments also offer a range of concessions on rates and utilities, public transport, and other costs.

So What If You Don’t Qualify For An Age Pension?

This means that you are considered a Self-Funded retiree. And while the honors are on you to support yourself financially, you may be entitled to a Commonwealth Senior’s Health Card. If your income is below the required limits, the CSHC as it is commonly known entitled you to many of the said concessions afforded to holders of a pension concessions card.

You can submit your age pension claim up to 13 weeks before you reach eligibility age by using the Human Services website, or by picking up an application form from your nearest Centrelink Services Center.

Talking about Super

Superannuation can be compared to a pension fund. It is a required retirement saving that is charged to your employer. It is necessary for employers to give the least amount of 9.5% of your salary in superannuation.

As soon as you generate over $450 per month it is necessary for your employer to donate 9.5% of your money into a super fund. You are granted the benefit to get super donations from an employer if you are at least 18 years of age. We can assist you to have it back as soon as you depart from Australia.

From July 2014, the super contributions contributed by your employer has to be 9.5% of your usual salary. This amount needs to be donated to a chosen super fund. Typical employers are going to give donations every three months and not just on every month.

You can prefer to start an account with a Superfund in a straightforward manner or request your employer to start it for you.

It is not of great importance if you are working as casual or regular, or if you're non-resident or resident for taxation. Your employer should donate superannuation on your behalf if you are eligible given the criteria above.

The superannuation is applied with a tax of 15% by the ATO and is donated by your employer.

You can find more information about the basics of superannuation in this section – Finding and Consolidating Lost Super.

Government and Budget Says Superannuation Still a Major Player

The government has its battle to fight from critics within and outside the party going against superannuation changes announced on Budget night.

“Nobody likes paying more tax. Super has been an extremely generous system. It remains a very generous tax-advantage system. That hasn’t changed. For people on very high incomes, and people with very large balances, it is not quite as generous as it used to be and they are required to pay some tax. But 15% is a lower rate of tax that any Australians pay on their personal incomes.”

Also added “15% remains a very concessional tax rate than a kid pays on his marginal incomes stacking shelves at Woolies. Let’s get real about this.”

The government says that the changes will affect only 4% of superannuants, but most super funds in Australia’s largest accounting body disagree.

Alley Malley of CPA Australia said that their research shows there will be somewhere between 20 and 30 percent of the Australian population that will be impacted. They believe that a backlash three years ago in the Hockey Budget will be dwarfed on what is going on now with superannuation.

One of the changes involved is the so-called Transition to Retirement Scheme. It’s for people aged between 55 and 65, and it allows them to receive some super income while they’re still working. Currently, earnings on those accounts aren’t taxed, but from July next year, the government wants to apply a concessional tax on earnings of 15%.

The government says it’s about fair that only 115,000 people will be affected, but that number is highly contested. The Association of Super Funds, the industry’s peak buddy says more than half a million people will be affected.

The CPA agrees and asserts that the scheme will not just affect the wealthy but that the larger population would be impacted. And the reason for that is people are planning for their retirement. They have been trained to do so. And all of the sudden the rules have changed.

Lately, The Association of Super Funds published new figures based on an analysis of information from the tax office and the industry regular. The association says it believes 9% of superannuants will be worse off but that 30% will be better off because of the policy changes.

Super vs. Age Pension

Super savings will help you acquire and enjoy the ideal retirement compared to that offered exclusively by the Age Pension.

The present ‘retirement age’ within Australia for both males and females is 65. During that period, Australians are qualified for an Age Pension since that is indeed generally the retirement age. Such threshold though is expected to shift shortly.

It is crucial to keep in mind that the Age Pension was designed to offer a source of contingency for those who don’t have much superannuation or another financial resource for sufficient retirement income. Thus, Age Pension is a supplement to superannuation.

The majority of people – especially women – will always be eligible for a part or full Age Pension, supported by any superannuation benefit they get.

Super Pension and Lump Sum When You Retire?

The significance of getting either pension or a lump sum from your super account once you retire will depend on your circumstances. Your decisions may determine how much tax you will be paying along with your entitlements for a government-supported Age Pension.

These taxation regulations were designed to help people get their benefits in the form of pension instead of a lump sum. There are several points that must be taken into consideration when choosing whether to take a pension, lump sum or super benefit.

Seeking Help and Advice

As we said earlier, the decisions you make can make a huge difference as far as the future of your retirement is concerned. If you want to ensure that you are making the right choice and avoid any unnecessary mistakes, then it would be best for you to get some advice.

At Australian Super Finder, our administrators provide sound advice on matters that involve superannuation. You can call our office anytime at - 1300 559 392, then our administrators will answer you. You can also find more information about this topic on our knowledgebase at: https://www.australiansuperfinder.com.au/knowledge-base.html

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