2008 Federal Budget
Wayne Swan’s first budget aimed to reduce net government spending with a view to reducing inflation. It has been described as the "Working families’" budget with a number of benefits scaled back for higher income earners. Spending to meet Labor’s election promises, plus other initiatives, were largely funded by cuts in other areas of the budget.
Despite some expectations of major changes to superannuation in Australia, the government made only a few announcements around superannuation, in particular, the treatment of salary sacrifice contributions in the calculation of various rebates and personal benefits.
Key announcements that may affect members and employers are:
Members:
- Salary sacrifice contributions will be added back into assessable income for the purpose of calculating certain income-tested benefits and rebates delivered through the tax system. While a detailed list of affected payments has not been released, it is believed to include social security payments for those under Age Pension age, the new Baby Bonus threshold and child support.
- Of particular interest to members would be that the Government’s Co-Contribution payment will also be calculated on this higher income level from 2009/10. Salary sacrificing and receiving a co-contribution payment based on the resulting lower income level will only be available to members for one more financial year.
- The promised First Home Saver Accounts were announced to become available from 1 October 2008. The earnings will be taxed like superannuation funds and contributions (after-tax only) will be met with a 17% co-contribution from the government on the first $5000 contributed each year.
- The government also conformed that terminally ill persons can withdraw their super tax-free if under 60. This legislation is to be backdated to 1 July 2007.
- Tax-free withdrawals from age 60 will continue.
Employers:
- A central clearing-house has been promised to allow employers to contribute all super contributions to the one entity who will then distribute the contributions to the appropriate super funds. This is planned to be introduced on 1 July 2009, however some consultation will be required on the measure to ensure it runs efficiently and that all legislative requirements are met.
- Seconded workers from Finland and Poland will no longer have to have compulsory superannuation contributions made to both countries’ funds.
- The start date for the payment of temporary residents' superannuation to the Australian Government will be deferred to the date of Royal Assent (expected before the end of 2008).
- The promised extension to the ability to make late contributions to offset the Super Guarantee charge (SGC) (rather than paying directly to the ATO) was confirmed. Late payments will remain non tax deductible to the employer.
General:
- Changes to the income tax rate thresholds were also announced, though differing slightly to those originally outlined during the election. In 2008/09, the 30% threshold increases from $30,000 to $34,000, the 40% threshold from $75,000 to $80,000 and the 45% threshold from $150,000 to $180,000.
- Amongst the announced new and confirmed measures, the government announced that it would undertake an extensive review of the current Australian taxation system. This may affect superannuation legislation going forward.
Public Sector Employees
There were no significant announcements relating to the superannuation of Australian Public Sector employees, however funding was allocated in the current budget to service the implementation of the changes announced in last year’s budget. (See news item "2007 budget")
Further information about these and other budget announcements can be found at the Budget website.
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