Federal Budget Information
The 2017/18 Federal Budget was brought down on Tuesday 9 May 2017.
Selected 2017/18 Federal Budget measures affecting SCOA members
Restoration of Pension Cards and One-off Energy Assistance Payment
Those retirees who lost their pension cards on 1 January 2017 due to the change in the age pension assets test taper rate will be issued with new pensioner concession cards. There was a one-off energy assistance payment to recipients of the age pension and the disability support pension, as well as veterans, on 20 June 2017. Note, however, that carer payment recipients did not receive that payment.
Deferral of Drawdowns from the Future Fund
The Government has decided that drawdowns from the Future Fund will not commence before 2021-22 and may be delayed until at least 2027. The objective of the Future Fund has been reduced by 50 basis points to CPI + 4, or 5% per annum. For further detail, see www.futurefund.gov.au.
The NDIS and the Medicare Levy
The Medicare Levy is to be increased by half a percentage point from 2.0 to 2.5 per cent of taxable income from 1 July 2019. The Medicare Levy low income thresholds will be increased in line with the CPI to $34,244 for single seniors and pensioners and to $47,670 for couples, plus $3,365 for each dependent child or student. The Bill to increase the Medicare Levy has yet to be brought to Parliament.
Contributing the Proceeds of Downsizing to Superannuation
The Government will allow a person aged 65 or over to make a non-concessional contribution of up to $300,000 from the proceeds of selling their home from 1 July 2018. These contributions will be in addition to those currently permitted under existing rules and caps and they will be exempt from the existing age test, work test and the $1.6 million transfer balance cap for making non-concessional contributions. The measure will apply to a principal residence owned for the past ten or more years, and both members of a couple will be able to take advantage of this measure for the same home.
Selected Federal Budget measures from previous years
Tax deduction for personal superannuation contributions – 2016/17
All people up to the age of 75 can claim a tax deduction for personal concessional superannuation contributions regardless of their employment circumstances (previously the person’s income from employment had to be less than 10% of their total income). Applies from 1 July 2017.
Increase in the threshold for tax offset for spouse contributions to low income spouse – 2016/17
From 1 July 2017 the threshold for the low income spouse superannuation tax offset will be increased to $37,000. If that spouse has income of less than $37,000, the contributing spouse will receive a tax offset of 18% of the superannuation contributions up to a maximum of $540.
Transfer cap of $1.6 million – 2016/17
The maximum amount that can be transferred from the accumulation phase to the pension phase will be $1.6 million, from 1 July 2017. After the transfer, there are no restrictions on subsequent earnings on the assets held in the pension phase. For CSS and PSS pensioners, the notional lump sum to be included in the transfer cap was calculated by multiplying the gross salary at 30 June 2017, which included the CPI increase of 1%.
Cap for non-concessional super contributions 2016/17
The 2016-17 budget had proposed a lifetime cap of $500,000 for non-concessional contributions made after 1 July 2007. However, that measure was replaced by the rule that no further non-concessional contributions could be made once total superannuation assets exceeded $1.6 million.
Low income superannuation tax offset 2016/17
From 1 July 2017 the Government introduced the Low Income Superannuation Tax Offset (LISTO) to reduce tax on superannuation contributions for low income earners. Eligible individuals with an adjusted income up to $37,000 will receive a LISTO payment to their super fund, equal to 15% of their total concessional (pre-tax) super contributions for an income year, capped at $500.
Concessional contribution limits and cap 2016/17
From 1 July 2017 the Government will lower the concessional contribution cap to $25,000 for all superannuation fund members. The threshold for high income earners will reduce from $300,000 to $250,000. A contribution tax of 30% will apply to concessional contributions by those with incomes greater than $250,000. For unfunded defined benefit schemes such as the CSS and the PSS, the Government will estimate the notional contribution of those pensions to the concessional contribution cap and the transfer cap by a factor of 16 as of 30 June in the previous financial year.
Transition to retirement pensions 2016/17
From 1 July 2017 these will be paid out of the accumulation phase, where fund earnings are taxed at 15%, instead of from the pension phase where fund earnings are tax-free.
Removal of the anti-detriment provisions for death benefit lump sums – 2016/17
This provision was removed from 1 July 2017.
Age pension – Reset the income test deeming rate thresholds – 2015/16
In the 2014-15 budget, it was announced that the income test deeming rate thresholds, which are indexed, would be reset back to $30,000 for singles and $50,000 for couples from 20 September 2017.
The Government announced in the 2015-16 budget that the reset of the income test deeming rate thresholds will not now proceed. Click here to see the current Deeming Rate Thresholds.
Income test – cap deductible amount for Defined Benefit Income – 2015/16
In the 2015-16 budget, the Government introduced measures to cap the proportion of income that can be excluded from any income test (the deductible amount) at 10% from 1 January 2016.
A defined benefit income stream is a pension paid from a public sector or other corporate defined benefit superannuation fund where the pension paid generally reflects years of service and the final salary of the beneficiary.
Under previous arrangements, some defined benefit superannuants were able to have a large proportion of their superannuation income excluded from the pension income test.
For example a couple with a defined benefit scheme income stream of $120,000 a year with a 50% deductible amount could exclude $60,000 from the income test. Only the remaining $60,000 was assessed as income under the income test, which resulted in the couple receiving a part pension of $7,400 per year in addition to their defined benefit pension.
This measure introduced a cap on the superannuation income stream amount that can be excluded from relevant social security income tests.
This measure may apply to some PSS defined benefit members and CSS members where the additional non-indexed pension is included in the CSS pension.
A PSS or CSS defined benefit pension is made up of three components:
- Tax free component
- Taxable taxed component
- Taxable untaxed component
Only the taxable taxed and the taxable untaxed components are assessed as income for the age pension. The tax free component was previously not assessable income for the age pension.
Under this measure, if the tax free component is greater than 10% of the total PSS or CSS defined benefit pension then the amount of the tax free component that exceeds 10% of the total PSS or CSS defined pension will be included as assessable income for the age pension from 1 January 2016.
Defined benefits income streams from military superannuation funds such as the DFRDB and the MSBS are exempt from this measure.
Social security assets test – rebalance asset test thresholds and taper rate – 2015/16
From 1 January 2017, the Government increased the asset test thresholds and the withdrawal rate at which pensions are reduced once the threshold is exceeded.
Pensioners who lost pension entitlement on 1 January 2017 as a result of these changes were automatically issued with a Commonwealth Seniors Health Card.
In addition, in the 2015-16, budget the Government decided not to proceed with the 2014-15 Budget proposal to index Centrelink pensions and pension equivalent payments by the Consumer Price Index. Pension and pension equivalent payment rates will continue to be indexed under current arrangements — by the higher of the increases in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI) and benchmarked against Male Total Average Weekly Earnings (MTAWE).
For an update, please go to the Health and Ageing page ( http://www.scoa.asn.au/health-and-aging/ )
Aged Care – Alignment of aged care means testing arrangements
The Government changed the aged care means testing arrangements for new residents entering aged care from 1 January 2016.
This measure aligned aged care means testing arrangements for residents who pay their accommodation costs by periodic payments with the arrangements that currently apply to those residents who pay via a lump sum. This removed the rental income exemption under the aged care means test for aged care residents who are renting out their former home and paying their aged care accommodation costs by periodic payments.
Existing protections such as annual fee caps and lifetime fee caps remained.
Aged Care – Home Care Program – 2015/16
From 1 February 2017, Home Care Packages will be allocated directly to consumers by the My Aged Care Gateway rather than to service providers through the Aged Care Approvals Round.
To be eligible for a package, a consumer would be assessed by an Aged Care Assessment Team to determine the appropriate level of assistance and their care needs. The My Aged Care Gateway will be responsible for prioritising clients’ access to packages at the regional level within the number of packages allocated through the planning ratio. This will enable aged care recipients to receive services from a provider of their choice, including the ability to change providers.
Aged Care – increasing short term restorative care places – 2015/16
The Government incorporated short term restorative care places into the aged care planning ratio from 1 July 2016.
This measure resulted in an overall increase in the number of short term restorative aged care places to support older Australians regain mobility and confidence to live safely at home after a period of hospitalisation, and reduce the number of premature admissions into permanent residential care.
The measure will ensure that the growth in short term restorative care places matches the growth in the aged population.
Aged Care – independent aged care complaints arrangements – 2015/16
The Government strengthened the independence of aged care complaints handling arrangements by transferring the responsibility for the administration of the Aged Care Complaints Scheme from the Secretary of the Department of Social Services to the Aged Care Commissioner from 1 January 2016.
The website for the Aged Care Complaints Scheme is https://www.agedcarecomplaints.gov.au/
Carer support services – national gateway
In the 2015-16 budget, the Government provided $33.7 million over four years from 2015-16 to create a national gateway for carers to access information, support and referral to carer specific supports and services.
The gateway will consist of a website, including a service finder similar to that available on the My Aged Care website, and a national call centre via a dedicated 1800 number to assist carers locate and access services for themselves and for the person/s in their care.
Establishing a national gateway will improve access to information and services for carers, which is currently fragmented and difficult to navigate with services and supports spanning multiple sectors including aged care, community mental health and disability.