Disclaimer: What you're about to read is of a general nature and doesn't take into account your personal financial situation, needs or objectives. We recommend you seek financial advice before making any decisions about your super and consider the relevant UniSuper PDS and TMD.
Josh Frydenberg: Tonight, I announce that the Budget is back in the black and Australia is back on track.
Audience: Yeah.
Lyndon: Well, hello. You're listening to the Federal Budget edition of Super Informed Radio, the podcast that unpacks the world of superannuation, finance and life's money matters. I'm Lyndon and joining me, as always, is my co-host, Marta. Good morning, Marta. How are you going this morning after Budget last night?
Marta: I'm actually not that tired, Lyndon, which is surprising, considering previous years, we've been up quite late. But considering the fact that the Budget this year was kind of light on announcements related to super, we managed to get out at a decent hour.
Lyndon: Yeah, it seemed like there kind of wasn't that much, really.
Marta: It was kind of announced ahead of the evening, which kind of helped matters. But there are a couple of announcements I would have thought would be good to flush out a bit more as well as understand the context of a Budget right before an election.
Lyndon: Very good. Well, to help us deep dive into this a little bit more, we have our resident expert on all things Budget, UniSuper's Public Policy Manager Benedict Davies, here with us in the podcast studio. Benedict, welcome back to "Super Informed Radio."
Benedict: Delighted to be here, Lyndon.
Lyndon: Delighted to have you as always. Benedict, it's an election-eve Budget.
Benedict: Yes, it is. But it's also an early Budget.
Lyndon: An early Budget. And literally earlier than usual.
Benedict: Five weeks earlier than usual, and also the first Budget ever in daylight saving time.
Lyndon: In the daylight.
Benedict: It's normally in May, or it had been in August in the past, but it's the first time it's been in, I guess, in summer daylight saving time.
Marta: Yes, so why was that? Why did the government announce or have the Budget earlier on than the usual second week of May?
Benedict: Well, it's to do with the electoral cycle. They need to call an election of both houses, if they want to do both houses of Parliament at the same time, by the 18th of May, or else they'd have to have a separate House and Senate election. And to do so, it needed to have a Budget before. And normally, the Budget's in May, so the Budget was brought forward five weeks.
Marta: Like we said before, announcements were a bit thin on the ground, but there were some interesting ones related to tax, I think. Could you flesh that out a bit more?
Benedict: Certainly. Well, it actually follows really from on, I guess, the strategy the government had in last year's Budget, which was a personal tax plan. They've introduced, or announced, I should say, when I say announced, the Budget is still announcements at this particular point in time. But the government's moving very quickly to try to legislate at least the tax cut components. But there's not a lot of time left in the Parliament. So that's just a background to the tax cuts. But the personal tax plan is an ongoing, I guess, policy of the current government.
Last year, they introduced some tax cuts, mostly delivered through low- and middle-income earners through…it's a fairly complex mechanism behind the scenes called the low- and middle-income tax offset. I don't think you need to worry about the mechanics of it. I think the simplest thing to do, if you're interested, is to go onto the budget.gov.au website and there's a calculator. You can put in your salary and it would tell you what potential tax cut you may be in for.
I put in a few different figures in and, say, about $84,000 of taxable income had about a $1080 tax cut, and then that will be double for a couple of people’s income, things like that. But you can play around with that tool to see what it might mean for you.
And then there are longer-term changes to rates and thresholds, 2024-25, but this first bit is quite immediate. The Treasurer said for those submitting their tax returns in 13 weeks' time may be eligible for this, depending upon their income. And that's the first component which was probably the most interesting thing for listeners, because there wasn't a lot in superannuation, to be truthful, yeah.
Lyndon: So just on that, some of the superannuation-related things in the Budget were announced before the Budget was handed down, what exactly are they? Can you talk us through those and just [inaudible 00:04:19] them a little bit?
Benedict: In an exciting pre-Budget eve, normally, there might be leaks, but the Treasurer made it…put out a press release, it was about 10:00 of the eve of the Budget night announcing some age-based contribution rule changes.
Sounds a little bit complex, but it's going to be of interest to those 65, 66. It's aligning the contribution rules to an increase that's already legislated to happen at the age pension age. The age pension age is going up to 67. And in recognition of that, they're looking at making some changes to some of the contribution rules.
One of the issues in contributing to super in the year in which you retire, and say a person retires in 65, there's a work test, there's some rules around making large contributions in the year in which you retire, and they're trying to address those rules. They're a bit complex in the past and they've required quite clever, strategic financial planning, and I guess these rules are designed to make it a bit easier for those 65, 66, and turning 67. The exact mechanics are still a bit confusing, but I mean, you know, if you retire at 65, it's now going to make it a bit easier to prepare for your retirement.
There's another part of that announcement which is increasingly the age through a change in spouse contributions. Currently, it's capped at 70. A person who's older than 70 can't receive a contribution from someone other than the member or an employer, which is a technical way to say a person can't receive a spouse contribution. But they're changing that so a spouse contribution will be able to go up to the year in which the person turns 75.
So there's sort of three age-based contribution rule changes that have been announced.
Marta: So Benedict, if these changes do come into effect, when are they supposed to come into effect by?
Benedict: Their proposals at this stage, the announcement though would introduce them from 1 July 2020.
Marta: And if you would like to read a bit more about these announcements in detail, head over to our website at unisuper.com.au/budget to get the lowdown.
Lyndon: Now, Benedict, some of our listeners might also be interested to learn whether there was anything related to the Royal Commission or the Productivity Commission in this Budget. It didn't sound like there was anything. Is that right?
Benedict: Not direct responses to the recommendations per se, there may be a handful of them, but there was certainly recognition that's there's been the Royal Commission and it's going to require significant funding for regulatory agencies, and there was announced an expansion of their Budget.
There was also announced a small amount of money to look into the idea of getting a consumer advocate for superannuation. So definitely recognizing that there's going to be some further changes coming out of the Royal Commission and the Productivity Commission. The government announced are quite substantial additional funding for regulators, the tax office, and other parties.
So no changes for members, really, to superannuation in this Budget, but I think in future budgets, there's going to be more systematic changes or changes to the broad direction for superannuation if the government acts on the recommendations of those two inquiries.
Lyndon: So Benedict, this is kind of an election-eve Budget, really. And it's so close…I think it's only like a day or something. I mean, we're recording this on the morning after the Budget, Wednesday, the 3rd of April. Isn't there only like one day of Parliament left to sit?
Benedict: There's a few more working days of Parliament, but not many. The Senate's got two days. The House will sit for the rest of this week till Thursday, have a week off, potentially for Senate estimates, and then come back for four days and that's the House of Representatives.
So an election, if the government proposes to have an election for both houses, they'll need to call that by the middle of April, would mean an election of the 11th or the 18th of May. The law requires 33 days of campaign as the minimum or 68 for those who really want a long campaign. So I've been trying to work out what that means, but more than likely, there's going to be an election called possibly this weekend or next weekend.
So the context of this Budget is announcements, which may end up just forming a platform for re-election, rather than actual legislative changes given there's not a lot of sitting time left in the Parliament.
Marta: So Benedict, if anyone listening has some questions, I believe you're going to be featuring in a live webcast coming up this Friday.
Benedict: We're doing a webcast at lunch time on Friday, yes, and please think of questions. We would love to hear them because it's very valuable feedback and it actually helps us with form the content to work out what members really want to know about the Budget. So we'll go through the superannuation changes, some of the tax changes, and member's questions.
Marta: You can find a link to that webcast in our show notes.
Lyndon: Well, Benedict, thank you so much for joining us once again on "Super Informed Radio." We always appreciate your insights and knowledge, so thanks for popping by.
Benedict: I always enjoy it.
Lyndon: And that wraps up another episode of Super Informed Radio. As always, you can catch up on past episodes at unisuper.com.au/podcasts or subscribe to us through any good podcasting app. We'll see you next time.
Marta: Bye for now.