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What the federal budget means for your super

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As expected, the government did not announce any changes to superannuation in Tuesday night's budget.

While this is good news there are implications for super following a number of announcements.

Here is a snapshot:

Budget 2015

Tightened pension eligibility testing

Already flagged before the budget, the government proposed changes to pension eligibility tests. From January 2017, couples with assets of more than $823,000 (excluding the family home) will no longer receive any pension payments.

This has been reduced from $1.15 million. Around 91,000 will be affected while another 235,000 will receive less in pension payments.

The assets threshold for the full pension, which excludes the family home, has been raised from $202,000 to $250,000 for singles and from $286,000 to $375,000 for couples.

Implications: For retirees the sweetener in all this is that at least wealthier retirees can still hold on to the Commonwealth seniors health card or health care card. Another positive is that no changes have been made to tax concessions into super (a measure that has come under increasing pressure to be abolished).

It is also important to note that these proposals are not law yet. Any changes will only kick in on January 2017, says BT Financial Group head of technical services Bryan Ashenden.

He says that retirees have 18 months to consider their loss of income. They should plan for this scenario now and think of an action plan such as whether to sell any assets, look at further drawdowns in superannuation or rethink their investment strategy.

The age pension and super are strongly linked so for those still working the changes put the spotlight on the importance of saving for retirement.

Under the current age pension assets test, the Association of Superannuation Funds of Australia (ASFA) estimates that a couple would need a joint super balance of around $510,000 to achieve a comfortable retirement. It says that under the changes, a couple will need around $120,000 more for a comfortable retirement.

Ashenden says workers should really look at taking advantage of salary sacrificing into super and taking advantage of the tax concessions. Currently people can make concessional pre-tax contributions of $30,000 (under 50) or $35,000 (over 50) or a $180,000 after-tax contribution.

Finding lost super

The government will cut red tape to streamline the process for super funds and the Australian Taxation Office to help people find their unclaimed super.

Implications: Around $6 billion is sitting "lost" in unclaimed super accounts. Helping people find their lost super will boost the retirement savings of many superannuants.

Childcare reforms

Families are expected to get $3.5 billion childcare including a $246 million "nanny trial".

Implications: The gender gap in super remains a significant issue with women still facing a $92,000 retirement shortfall. "This measure will help boost the superannuation savings of thousands of women, by making it easier for them to make the choice to return to paid work earlier and therefore contributing to super for a longer period of time," says ASFA chief Pauline Vamos.

Small business tax cut

Small businesses will get tax cuts, tax breaks and unlimited tax deductions for items under $20,000 with some capital gains tax obligations waived. The measure is aimed at stimulating the economy with some analysts predicting a spending bonanza in retail.

Implications: Before businesses rush to spend, Vamos cautions that business owners should direct some of the savings from the tax cuts into super.

The average self-employed person has around $120,000 in retirement savings compared with the average balance of $180,000 for wage and salary earners.

"The tax relief provided by the government to small businesses will hopefully give them the opportunity to contribute at least a little more to their superannuation, and put them on the path to financial security in retirement," says Vamos.

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Christine St Anne is online editor at Morningstar.
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