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.

When we recorded this podcast, the budget announcements we discussed were only proposals so they shouldn’t be considered final until legislation passes.

Tania: Hello and welcome to this special federal budget recap edition of Super Informed Radio, the official UniSuper podcast. I’m Tania.

Lyndon: And I’m Lyndon.

Tania: Well, Lyndon, it was budget night last night. We do get a little bit excited about budget night. Although it didn’t have a whole heap of announcements in relation to super, which could be seen as a good thing, we’re not too sure. We are going to find out more. There were a couple of announcements which we’ll come to, but as expected, the federal budget focussed on easing the cost of living for all Australians.

Lyndon: That is right, Tania. It was handed down in the context of the recent floods that we’ve been having in Australia, the situation in Ukraine, and of course, an imminent Federal Election. So, to talk about the small number of super announcements in the budget, we are joined by UniSuper’s Policy & Advocacy Manager, Benedict Davies. Benedict, welcome back to Super Informed Radio.

Benedict: Hello Lyndon, hello Tania, it’s good to be here.

Tania: Righto Benedict, let’s get straight into it. Can you tell us what was announced that might be of most interest to our members?

Benedict: Thanks Tania. Every budget has a lot of announcements, but what was interesting last night was that there were really no major announcements about superannuation. The Treasurer’s speech didn’t even mention the word superannuation once, which is pretty rare. In 20-odd years I can’t think of a budget without a major, or at least a handful, of superannuation announcements. So that was very interesting in its own right.

There has been a lot of change, though, over the years. And to some extent, this is to be welcomed. We’ve had the Hayne Royal Commission, we’ve had the Productivity Commission’s three-year review, we’ve had last year’s Your Future, Your Super, so there’s been a lot of change anyway. So to some extent, we can welcome this. For members out there and people thinking about their retirement plans, this budget means no need to tweak your retirement plan.

Tania: Benedict, you did mention that there was one main announcement relating to super, could you tell us what that was?

Benedict: Sure, Tania. In fact, it was announced really before the budget through the media, but certainly announced last night. This will be of interest to current retirees drawing down on their pension—so, for those of you who aren’t retired, it doesn’t affect you. But for those drawing a pension, the drawdown relief has been extended for a further year. This came in initially as part of the government’s response to the Coronavirus pandemic allowing those to draw a smaller minimum pension than previously. And that will be extended for a further year until 30 June 2023.

Current pensioners don’t need to do anything at this particular stage. We’ll write to them in due course about what their pension will be for the next year.

Lyndon: Benedict, were there any other announcements that are even kind of related to super, or related to people who are interested in their super? Or that’s pretty much it?

Benedict: Yeah, no, I think there was some things in there that will just interest the general public about the budget. Sort of family, household issues. The first is, you know, we’ve heard about in the past the ‘Lamington’ Tax Offset, the Low- and Middle-Income Tax Offset which, you know, spells a nice acronym in LAMITO if you recall from previous budgets. That will now include an additional $420 cost of living tax offset, it’s effect in the current financial year. So, I mean, that would come into play when people lodge their tax returns at the end of this financial year. That may be of interest.

Again, the cost of living thing was in this budget, so there’s a cost of living payment of $250 to eligible pensioners, certain concession card holders, welfare recipients and the like. That will be of interest to some.

The government also announced plans to change the Paid Parental Leave Scheme. So the Commonwealth Paid Parental Leave Scheme is 18 weeks, and there’s two weeks for currently Dad and Partner Pay, the DAPP. There’s plans to integrate those two together so that it will be a 20-week scheme to allow households to take different amounts of that leave to facilitate different caring responsibilities, so I think that might be of interest as well.

But as you can see, I mean, you know, for the first time in a long time, not a lot on super.

Tania: Why was that? I mean we are quite accustomed to seeing quite a few announcements relating to super on budget night, what happened this year?

Benedict: That’s an interesting question. And I guess there are a number of ways to potentially answer that. One, there has been a lot of change over the years which I mentioned, a lot of change. And there may be a view that no further change is needed at this particular point in time. Two, that was picked up really in the back page of the Financial Review on Budget Day in the morning, first thing, Chanticleer wrote an interesting piece, under the headline ‘Politicians don’t want to meddle with super’. So there is a sense that making regular changes to super, tinkering, depending on whatever language you use, could be considered meddling as well. And so that article argues that superannuation was once a soft target for politicians trying to raise revenue, but they’ve backed off in the face of changed community perceptions as super’s status as a sacrosanct saving vehicle. Quite a hard thing to say, sacrosanct savings vehicle, but you know, nice bit of alliteration.

And the third, you know, that article also references some research that one of the peak bodies in superannuation’s done about what the community thinks about superannuation. And for most Australians superannuation’s not really on the agenda as a policy issue. For the vast majority of Australians from this research, they regard further regulation, further changes, potentially as unhelpful. And the majority seem to have greater concern around issues like climate change, housing affordability, things like that. Superannuation just doesn’t resonate. So there’s maybe a sense that the community doesn’t always welcome regular changes to superannuation. I mean, because as we said before, changes to superannuation could change your retirement plan.

For those members who are interested in reading more about the budget beyond this morning’s newspapers and beyond the specifics about superannuation of which there’s not a lot, I’d encourage them to read Peter Martin’s piece in The Conversation which talks about the big macro issues for the budget settings. There’s also a good piece in there by Michelle Grattan. And also analysis of particular portfolio responsibilities like housing and health. So always really good. I encourage members to have a look at that as well, to get a different perspective.

Lyndon: Excellent, we’ll include links to those items in our show notes. Benedict, just before we wrap up, though, what’s happened with last year’s budget announcements, are they law yet or are they still proposals, what’s going on there?

Benedict: Well, most of the last year’s policy announcements have been legislated, the superannuation ones, in February last month. I’ll run briefly to the high level of what happened because they’re coming into effect from 1 July 2022. So it sort of gives you a sense of how long it takes to actually make an announcement and then legislate it as well. It can often be an announcement, well budgets are normally in May, but often it might be April or May the next year by the time they get legislated. So there is a long process from an announcement to putting into effect a budget change. I mean, last year’s budget included the measure to remove the $450 threshold which is a longstanding feature of the super system which came in, in 1992, and it was linked to the then tax-free threshold. And that prohibited people who earned less than that from getting superannuation payments. That’s being removed from 1 July 2022. I think that’s about to benefit about 300,000 people, low-income earners. So that’s to be welcomed.

The First Home Saver Super Scheme which is a scheme essentially to help people save for a first home deposit through superannuation using some of the concessional tax rules within superannuation. That’s been changed a little bit as well, allowing what used to be $30,000 but up to $50,000 in voluntary contributions to be made into this scheme arrangement.

Third measure, I think this is probably the one that will be of interest to a great number of people who have retired, which is the work test. And the work test has been around for a really long time and it’s a bit of a pain, you need to make a declaration every year that you’ve met the work test to make a personal contribution when you’re 75 or under. And so that’s likely to be of interest to many retirees from 1 July 2022, the work test for personal contributions will effectively be abolished. So that’s good for those who are trying to make a contribution after they’ve left the workforce.

And the final measure from last year’s budget, again coming into effect, is a new age threshold for downsizers. So, those of you who may be familiar with the downsizer rules, you can sell your house, certain circumstances… there’s quite a number of rules, but if you sell your house you may be able to make a contribution to superannuation of up to $300,000. And so that was eligible for people 65 or older, now it’s been reduced to age 60. So more people are eligible to make a downsizer contribution.

So, yeah those four measures were in last year’s budget and have been legislated recently this year.

Tania: Benedict, as always, it’s an absolute pleasure speaking with you. Thank you for coming in and joining us today.

Benedict: Thank you, it’s been a pleasure.

Tania: And that wraps up this special federal budget recap edition of Super Informed Radio. As we mentioned, we’ll be putting the links in our show notes to the articles that Benedict has been referring to.

Lyndon: That is right. And if you’ve got any questions or concerns about the budget announcements and how they relate to your financial situation, we recommend speaking with a qualified financial advisor. As always, if you’d like to catch up on past episodes of Super Informed Radio, you can do that unisuper.com.au/podcasts or you can subscribe to us through any good podcasting app. We’ll see you next time.

Tania: Bye for now.


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