26 October, 2022
On Tuesday 25 October 2022, the federal government released its October 2022-23 Budget.
Overview of the October 2022-23 federal Budget announcements
The government announced that this Budget is a “solid and sensible Budget, suited to the times we are in and the conditions we confront”. The Budget focuses on measures the government says will further cost-of-living relief, a stronger economy, and paying for what's important.
The following are the Budget announcements that relate to superannuation and retirement, noting there were limited super measures announced.
Additional detail on the Budget can be found at budget.gov.au. It's important to remember that the announcements are subject to legislative processes to take effect.
The government announced it will provide $350 million over five years from 2024-25 to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments and other key stakeholders. The support from the government will include availability payments over the longer term to facilitate institutional investment in affordable homes, including by super funds.
With more than two million members across Australia, Australian Retirement Trust fully supports the announcement of the government’s Housing Accord. Our priority is acting in our members’ best financial interests and maximising real, long term investment returns. As a large institutional investor, we have a role to play in carefully examining where there are opportunities for investment, or barriers that we can help to clear. Read more in our media release.
Earlier this year, we announced our intention to finance new social and affordable housing supply in Queensland in partnership with QIC and working in conjunction with Brisbane Housing Company (BHC). The proposed investment partnership provides an innovative and scalable model for the financing, development and operation of social and affordable housing without compromising our fiduciary duty to our members.
Expanding eligibility for downsizer contributions
Consistent with the pre-election commitment of both major parties, the government announced it will reduce the minimum eligibility age from 60 to 55 years for people to contribute to their super from downsizing their home. The Bill for this measure is in Parliament; if passed, it will take effect from the start of the first quarter after it is legislated.
The downsizer contribution allows people to make a one-off post-tax contribution to their super of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute and contributions do not count towards non-concessional contribution caps.
In addition, the government announced it will:
- extend the exemption from pension asset testing of the proceeds of sale of the principal home from 12 months to 24 months (to take effect from 1 July 2022), and
- increase the income threshold for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples (to take effect from April 2022).
Changes to deeming rates
The government also announced changes to the deeming rates, which are applied to financial investments, including bank savings, term deposits, superannuation savings (held by those over age pension age), certain income streams and other financial investments, in determining earnings for the pension income test. Specifically:
- the lower deeming rate (of 0.25 per cent) will apply to principal home sale proceeds when calculating deemed income for 24 months after the sale of the principal home (to take effect from 1 July 2022), and
- deeming rates will be frozen at their current levels (0.25 per cent for the lower deeming threshold currently up to $56,400 for singles and $93,600 for couples, and 2.25 per cent for the upper deeming threshold over these amounts) for a further two years until 30 June 2024 (to take effect from April 2022).
Allowing pensioners to work more before age pension reduces
Currently, if over age pension age, people can earn up to $300 per fortnight through gainful employment, which is exempt from the age pension income test – known as a "Work Bonus". Any unused part of this fortnightly Work Bonus accrues in a "Work Bonus income bank", up to a maximum of $7,800, which can be used to offset future income from work.
The government announced a once-off credit of $4,000 to people’s Work Bonus income bank. The temporary income bank top up would increase the amount pensioners can earn from working before their pension is reduced in 2022-23 from $7,800 to $11,800.
The measure would take effect from 1 December 2022.
This document has been prepared and issued by Australian Retirement Trust Pty Ltd ABN 88 010 720 840, AFSL No. 228975, the Trustee and issuer of the Australian Retirement Trust ABN 60 905 115 063. It contains general information only. Any advice does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of any advice having regard to your personal objectives, financial situation and needs before acting on that advice. Consider the Super Savings PDS before deciding and the TMD at art.com.au or call 13 11 84