The Federal Budget of 2009 was one of the toughest in recent history, largely due to the effects of the ongoing Global Financial Crisis and subsequent recession. A raft of changes have been put forward by the Federal Government in this budget, from increased age pension amounts to reductions in the non-concessional contributions cap. We will attempt to summarise this as best as possible with the information currently at hand.
Some of the key elements introduced were:
Concessional contributions cap halved - from 1 July 2009
- Clients have until 30 June 2009 to use the $50,000 cap for employer contributions and personal tax deductible contributions ($100,000 for over 50 year olds.)
- The concessional contribution cap for 2009-10 will be $25,000 for the under 50s, indexed from 2009-10 forward. (Indexation for 2009-10 lost.)
- The transitional $100,000 for over 50s reduces to $50,000 for 2009-10 to 2011-12 before it is phased out.
- The Non-concessional contributions cap remains unchanged at $150,000 and will be 6 times the concessional contributions cap going forward. (And no change has been announced to the $450,000 3 year bring forward provision for under 65s).
Government Co-contribution Matching Rates Reduced
- Matching rate reduced from 150% to 100% (maximum $1,000) for personal contributions in following financial years:
- 2009/2010
- 2010/2011
- 2011/2012
- Matching rate reduced to 125% (maximum $1,250) for personal contributions in following financial years:
- 2012/2013
- 2013/2014
- Matching rate returns to 150% (maximum $1,500) for personal contributions from 1 July 2014
Account-Based Pension Minimum Drawdown Relief Extended
- The minimums for account-based pensions, and other retirement income stream products, will be 50% of the “standard” regulatory levels for the whole of 2009-10.
Age Pension Lifting to age 67 by 1 July 2023
- There will be a transitional phase begin in 2017 where age pension age will increase 6 months every 2 years until 1 July 2023, this will affect people who are born after 1 July 1952, or who are currently over age 55.5.
- In 2009/2010 the upper limit for the 15% tax bracket will be raised to $35,000 income, and up to $37,000 from 1 July 2010.
- The Low income tax offset (LITO) will increase to $1,350 in 2009/2010 and to $1,500 in 2010/2011, effectively increasing the tax free thresholds for non senior Australians to $15,000 and $16,000 respectively.
- The low income Medicare levy thresholds will increase with effect from 1 July 2008.
- Family tax benefit Part A will be indexed to CPI from July 1 2009
- From 1 July 2010, the government will introduce new Income level tiers (‘Private Health Insurance Incentive Tiers’) which will determine:
- rate of Medicare Levy Surcharge for persons without private health insurance
- rate of private health insurance rebate
- Income thresholds will be indexed to wages.
- Singles and couples with income below the Tier 1 level will have no Surcharge Levy applied and will continue to be eligible for the full 30%, 35% or 40% private health insurance rebate they currently receive.
Increase in the Age Pension
An additional payment for those on the full rate of pension- $32.49 per week for singles (incl. $2.49 pension supplement)
- $10.14 per week for couples (combined) (as a pension supplement)
- Singles $336.68 per week
- Couples $507.50 per week (combined)
- $1,689 for singles
- $527 for couples (combined)
Age Pension Income Taper Test
The Age Pension taper rate will increase- Single - from 40 cents to 50 cents
- Couple – from 20 cents to 25 cents
