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BUDGET EDITION MAY 2019
Welcome to the Budget edition of 360°Magazine!
It’s an election year, so the 2019 Federal Budget was always going to be a pretty interesting one. This year’s announcement was moved to April to allow some time before Australia heads to the polls on 18 May. I’m not surprised to see a few tax bonuses were included in this year’s Budget. No doubt the Government hopes that items like increased tax offsets for low– and middle-income earners, as well as further changes to the tax thresholds will help support their campaign in the upcoming election.
On the other side, the Labor Party have already announced quite a few financial policies they intend to focus on should they win the election. You can read all about the Government’s proposals from this year’s Federal Budget and about the Labor Party’s policies on page 2.
As with most election years, there will be a little uncertainty around the legislation proposed in the Budget, at least until it is clear what the structure of the Parliament will look like post-May 2019. As always, we will keep you up to date with communications about anything that is likely to affect Intrust Super members.
In addition to our Budget analysis, this month’s edition takes a closer look at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. We also discuss some new legislation that looks set to make retirees’ finances a little more flexible.
Please feel free to contact Intrust360° if you have any concerns or questions about the topics discussed in this edition of 360° Magazine. You can call the financial advisers on 1300 001 360 or book an appointment online at intrust360.com.au.
Kind regards, Brendan O’Farrell
DisclaimerThis information has been prepared without taking into account your particular financial needs, circumstances and objectives and is therefore not suitable to be acted on as investment advice. You should assess your own financial situation and may wish to consult an adviser before you make any changes to your financial affairs.
Issued by IS Industry Fund Pty Ltd | MySuper Unique Identifier: 65704511371601 | ABN: 45 010 814 623 | AFSL No: 238051 | RSE Licence No: L0001298 | Intrust Super ABN 65 704 511 371 | USI/SPIN: HPP0100AU | RSE Registration No: R1004397.
IS Financial Planning Pty Ltd ABN 64 143 707 439 trading as Intrust360° is a wholly owned subsidiary of IS Industry Fund Pty Ltd ABN: 45 010 814 623. Intrust360° is a corporate authorised representative of Link Advice Pty Limited ABN: 36 105 811 836 | AFSL: 258145 | Corporate Authorised Representative Number: 379207.
LETTER FROM THE EDITOR
4
12
2
6
Contents
2 The2019FederalBudget All the news on the Federal Budget proposals
and how they may affect you
4 Reflectingonapost-RoyalCommissionfinancialservicesindustry
How much will the financial services industry change following the release of the Royal Commission’s recommendations?
6 Fivedreamsyoursupercouldhelpyouachieve
8 Brendan’sBanter The economic musings of a super
fund CEO
11Yourfamilyandfriendsmaynothavetherightanswers
Sometimes it pays to receive professional advice
12Moreflexibilityforretirees
Some new laws could help improve the financial situation of many retirees
360° | intrust360.com.au [ 1 ]
The 2019 Federal Budget was announced by the Treasurer on 2 April 2019. It’s an election year, and this year’s announcement was expected to contain a few tax bonuses ahead of the upcoming election campaign.
This year’s Budget has been announced earlier than its usual date in May, to give the Government the opportunity to present a final Budget before the election. Major takeaways from this year’s Budget are the reduction of tax for many working Australians, as well as some increased superannuation flexibility for older Australians. Although the Government had hoped that last year’s Budget would scrape through in surplus, they have instead projected this year’s Budget to deliver a $7.1 billion surplus in 2020.
We have summarised the major proposals we believe will be of interest to 360°Magazine readers. The following are the proposals announced in the 2019 Federal Budget. It is important to note these changes have not yet been legislated and will need to pass through Parliament. The likelihood of these proposals becoming law will also depend on the structure of Parliament after the election on 18 May.
Tax bonuses for low– and middle-income earners• For the 2018/19 financial year, those earning between $48,000
and $90,000 will be eligible to receive a maximum tax offset of $1,080 [an increase from $530]. For those who earn between $90,000 and $126,000, this offset will phase out at a rate of three cents per dollar. The base tax offset, for those earning less than $37,000, will increase from $200 to $255.
• From 1 July 2022, the 19 per cent tax threshold will be extended from $41,000 to $45,000. The Low Income Tax Offset will also be increased from $645 to $700 per year.
• From 1 July 2024, the 32.5 per cent tax rate will be reduced to 30 per cent, and the threshold increased to $200,000. The 37 per cent tax rate will be removed.
Changes to super contribution rules for those over 65 From 1 July 2020:
• The work test will be changed to apply only to those aged 67-74. Those aged 65 and 66 will be able to make voluntary super contributions without meeting the contributions work test. They will also be able to make use of the bring-forward rule, allowing them to contribute up to $300,000 in one financial year.
• The age limit for spouse contributions will be increased to 74.
Energy Assistance Payment• The Government will provide a one-off payment of $75 for singles
and $125 for couples who receive qualifying income support.
Medicare levy• The Medicare levy low-income thresholds will be increased
for singles, families, seniors and pensioners from the 2018-19 financial year.
Increased access to Aged Care• More funding will be provided to improve the quality, safety and
accessibility of Aged Care services and increase the availability of home care packages.
THE
2019 Federal Budget
[ 2 ] 360° | BUDGET EDITION
Superannuation contributions• All workers will receive superannuation
contributions from their employer, regardless of how much they earn. The low-income threshold will be reduced, then removed after five years.
• Super guarantee requirements will be extended to cover parental leave payments as well.
Franking dividends• Cash refunds on franking credits will no longer be
refundable. Franking credits can still be used to offset tax liability and reduce the tax payable down to nil. Anyone receiving Centrelink benefits will be exempt from this policy.
Contribution changes*• The after-tax contribution cap will be reduced
from $100,000 to $75,000.
• The new before-tax contribution catch-up rules, which became available from 1 July 2018, will be removed. Any leftover money in your before-tax contribution cap will no longer rollover to the following financial year.
Capital gains tax*• The capital gains tax discount will be reduced
from 50% to 25%.
Negative gearing*• Negative gearing will only be available to
investors buying new properties. The tax strategy will no longer be available on any other investment property. Those with existing negatively geared investments will be able to continue with this tax strategy.
Tax cuts for lower income workers• Labor will match the Government’s tax cuts
for people earning up to $126,000 and increase them for those on less than $40,000.
In addition, Labor has released a “Fair Go Action Plan”, detailing five additional policy areas it will focus on:• increased funding for schools and hospitals
• restored penalty rates
• guaranteed pensions, tax cuts for average workers and capped private health insurance premium increases
• investment in cheaper, cleaner energy
• increased infrastructure spending and closed tax loopholes used by the wealthy and multinational companies.
As always, if you have any questions about how any of these proposals may affect you, get in touch with Intrust360°! You can call 1300 001 360 to chat to one of our advisers or book an appointment online at intrust360.com.au.
Proposals from the Labor partyIt being an election year, we’ve also taken a closer look at some of the election promises that have been announced by Labor. Depending on the results of the election, some of these changes could have a chance of becoming legislated as well. The following are some of the policies Labor intends to implement should they win the next election.
*Applies to arrangements made after 1 January 2020. 360° | intrust360.com.au [ 3 ]
Reflecting on a
Post-Royal Commission financial services industry
After a series of life insurance, banking and financial planning scandals were unveiled in the media, public sentiment surrounding our financial services industry was at an all-time low in late 2017.
In response, the Government called for a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Royal Commission was established to conduct an inquiry into whether the activities of Australia’s financial services entities had fallen below community standards and expectations. The Commission lasted 12 months, receiving over 10,000 submissions and covering seven rounds of public hearings over 68 days.
There were some major examples of misconduct revealed throughout the Royal Commission. It was found that thousands of customers had been paying fees for no service. The Commonwealth Bank had been charging continuing advice fees to customers who had passed away. National Australia Bank admitted to finding that some of its banking officials had falsified documentation in relation to home loan applications1. These revelations have further damaged the Australian public’s faith in the financial services industry.
Throughout the seven rounds of public hearings, the Commissioner, Hon. Kenneth Hayne AC QC, considered how the multiple failures in the banking industry had occurred. His conclusion was reasonably scathing:
“Too often, the answer seems to be greed – the pursuit of short term profit at the expense of basic standards of honesty.” 2
[ 4 ] 360° | BUDGET EDITION
76 recommendationsA total of 76 recommendations were presented to the Governor-General on 1 February 2019 in the Royal Commission’s Final Report. Commissioner Hayne also recommended that 24 cases of misconduct by many of the major banks be referred to financial regulators for consideration of civil or criminal action. The following are some of the major recommendations made in the Royal Commission’s Final Report.
Financial advice• The establishment of a new disciplinary system to which all
financial advisers will need to be registered.• Grandfathering provisions that allow conflicted remuneration payments
for financial advisers should be removed as soon as possible.• Commissions for life insurance products should be reduced and
ultimately removed.• Australian Financial Services License holders should be required
to report compliance concerns about financial advisers to ASIC on a quarterly basis.
Banking• Banks should be barred from charging dishonour fees on basic
accounts [for instance, a fee charged when a direct debit payment is rejected].
• A national scheme should be established to mediate farm debts.• Borrowers, rather than lenders, should pay mortgage broker fees
for their services. Trail commissions to mortgage brokers for new loans should also be banned.
• Mortgage brokers should be required to act in the best interests of the borrower, not the bank providing the loan.
• The Banking Executive Accountability Regime laws should be expanded to track those responsible for breaching lending laws.
Superannuation• Superannuation trustees should be forbidden from assuming any
other role or office to prevent conflict of interest.• Individuals should be stapled to a single default super account
throughout their working life.• The deduction of advice fees from MySuper accounts should be
prohibited, and limits placed on the deduction of advice fees from choice accounts.
• Civil penalty offences should be in place for any breaches of the trustees’ and directors’ covenants and certain obligations in relation to MySuper.
• The unsolicited offer or sale of superannuation products should be prohibited, except under certain circumstances.
Criminal conduct and the regulators• Regulators Australian Securities and Investments Commission
[ASIC] and Australian Prudential Regulation Authority [APRA] should be overseen by a new independent authority to ensure they are carrying out their responsibilities.
• The Federal Court should gain expanded powers to cover corporate criminal misconduct in cases brought by the regulators.
• ASIC should consider legal action. Infringement notices should principally be used as the starting point in enforcement of administrative matters.
• A compensation scheme of last resort should be established. This would allow a platform for consumers and small businesses who have been failed by financial firms to have their cases heard. The scheme will pay compensation where a decision has been made in the consumer’s favour but the financial firm has been unable to pay.
24 companies were referred to the regulators for possible criminal or civil action.
Where to from here?Ultimately, the Royal Commission has highlighted that some banks and super funds may not be providing a service that’s in the best interest of their members.
The fallout from this is likely to be ongoing. The Federal Government and the Labor Party both announced their intention to support and implement all the recommendations in Commissioner Hayne’s report. However, the legislative form that these recommendations will take is not yet clear. And both have since announced plans to amend implementation of some of Commissioner Hayne’s recommendations slightly.
It’s clear that the industry is braced for major, and necessary, change. Customers are already acting on the revelations from the Commission, with billions of dollars in super savings shifting to not-for-profit industry funds.
Intrust Super has been a not-for-profit industry fund since it was established 30 years ago. As a 100% industry super fund, Intrust Super has no obligations to shareholders. As an organisation, Intrust Super has never paid sales commissions to brokers or advisers.
Intrust360° is a financial advice team created by Intrust Super to ensure members have access to low-cost, high-quality and impartial advice. Our legal obligations, our organisational structure and our history drive us to put members’ interests first.
So if you are looking for some financial advice you can trust, you can call on the financial advisers at Intrust360°. Book an appointment online at intrust360.com.au, or call 1300 001 360. 1Final Report, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Volume 1 and 2; Interim Report, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Volume 2
2Executive Summary, Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, page 1
360° | intrust360.com.au [ 5 ]
Many of us are so focused on achieving our dreams and travelling the world right now, we forget that life does go on even after our working careers are over.
One of the most exciting things about preparing for retirement is thinking about what you can do, where you could go and what you might achieve when you finish up with work. With the right planning, your super savings could help you to reach those goals. So how would you like to spend your retirement?
Five dreams your super savings could help you achieve
[ 6 ] 360° | BUDGET EDITION
Travelling the world
It’s not easy to tick off all your travel goals with 20 days of annual leave each year. Luckily, you can take all the time you need in retirement [finances depending, of course] to explore a new place. You could even decide to live overseas, even if it’s just for the short term. Many countries have a much lower cost of living than ours, so you may even save money! And with the widespread availability of short-term rentals these days, you could choose to travel the world with all the comforts of home still available to you.
Living somewhere newIf moving overseas feels like too big a leap, there are plenty of places on our own shores that could help you experience a new lifestyle in retirement. Many smaller towns in Australia offer proximity to big-city amenities as well as coastal views or country air. Places such as Toowoomba, the Mornington Peninsula, the Hunter Valley, or even the Huon Valley are within easy access of a capital city, but far enough away that the housing market is much more affordable.
Starting a business
Starting a whole new career probably isn’t what you’re looking forward to in retirement. But if there’s a goal or a passion that you’d like to pursue further, and you’ve just been lacking the time or the finances, retirement might present the perfect opportunity. With the right savings and know-how, you could even start generating an income for yourself and boost your savings!
Learning a new craft
Have you ever thought you might like to learn more about something and just not had the time to do it? Too often we just think of education as a means to an end. But if you’re not thinking about the career that could come out of it, there might be plenty of topics you would enjoy learning about in retirement. With more time and the right finances, retirement could be a great time to learn a new skill or develop a new passion.
Adopting a rescue
There are thousands of rescue animals needing homes and care, and unfortunately many of them need more attention than most of us have time to give. Anxiety issues are a common problem among rescue animals, both young and old. Many centres struggle to find a home for animals that don’t cope with being left alone for long periods of time. In retirement, you might find yourself with more time to give an animal who needs more care than others. And with the right finances, you might be able to improve an animal’s life through adoption.
Next stepsHave a goal in mind but still not sure if you have the savings in place? Call in the budget experts at Intrust360°. Our financial advisers can help put together a retirement savings plan that works for you.
They can have you well on your way to kicking your retirement goals in no time. Call 1300 001 360 to book an appointment, or visit intrust360.com.au.
360° | intrust360.com.au [ 7 ]
Brendan’s BanterThe economic musings of a super fund CEO
So far this year, sharemarkets have steadied following a particularly unpredictable period late last year. Pleasingly, we have seen positive returns in January, February and March.
Improving political tensionsThere have been a number of factors helping to improve sharemarkets. The US and China have made moves to diffuse the rising tension of trade wars. The end of the 35-day Government shutdown in the US also helped to improve investors’ confidence. On 11 April, after much uncertainty, the European Union agreed to give the UK an extension on their Brexit date until 31 October 2019 to agree to an exit deal. In addition, the US Federal Reserve [Fed] has changed its appetite from increasing rates to that of a hold strategy throughout 2019. I suspect, however, with so much political uncertainty still unresolved, we probably haven’t seen the last of market volatility for 2019.
Concerns over the Australian economyLocally, Australia’s GDP growth has slowed to below trend. The downturn in the housing market and drought reducing farming GDP are some of the issues causing the Reserve Bank of Australia [RBA] concern for our economy. If there are no signs of improvement, there’s a chance the RBA may lower rates in the latter half of the year. Completely at odds with this slowdown in our economy, there seem to be plenty of signs of positive Australian economic growth. Employment growth has remained strong and our unemployment rate is quite low. This positivity in the labour market should help to slowly deliver better income growth. In turn, this could increase consumer spending, even in spite of the impact of lower house prices. So despite the worrying signs in GDP growth, it’s not all bad news!
Focus on the long termAs always, it is important to remember that Intrust Super’s portfolio is well-diversified and designed to benefit you over the long term. Although market volatility may still be a factor for the rest of 2019, and can have an impact on returns in the short-term, Intrust Super’s Balanced option has returned 8.97% p.a. over 10 years compared to the median of 8.81% p.a.*.
If you would like to discuss your investment options and risk profile with a financial adviser, Intrust360° can assist. Give them a call on 1300 001 260 or book an appointment online at intrust360.com.au. *Source: SuperRatings Fund Crediting Rate Survey – SR50 Balanced 60-76 Index March 2019
[ 8 ] 360° | BUDGET EDITION
Core Super, Executive Super and Select Super returns as of 31 MARCH 2019
Stab
le
Cons
erva
tive
^
MyS
uper
| B
alan
ced
Gro
wth
Com
bine
d Sh
ares
^
Cash
Bon
ds
[fixe
d in
tere
st]
Pro
pert
y
Aus
tral
ian
Shar
es
Inte
rnat
iona
l Sh
ares
Monthly 0.60% 0.79% 0.79% 0.80% 0.96% 0.18% 1.35% 0.52% 0.44% 1.46%
FYTD 2.49% 2.90% 2.56% 2.65% 2.19% 1.54% 4.17% 4.32% -0.32% 4.67%
Rolling 1 year 4.04% 4.81% 6.15% 7.33% 7.90% 2.04% 4.46% 6.86% 7.10% 8.69%
Rolling 3 years* 5.46% 6.47% 9.35% 11.30% 12.33% 2.10% 3.63% 12.13% 10.78% 13.73%
Rolling 5 years* 5.41% 5.88% 8.46% 10.22% 10.40% 2.28% 4.35% 11.67% 8.86% 11.15%
Rolling 7 years* 5.81% 7.08% 9.55% 11.24% 12.00% 2.71% 4.59% 9.88% 10.34% 13.59%
Rolling 10 years* 6.16% 7.31% 8.97% 10.37% 11.80% 2.94% 6.40% 7.59% 10.68% 12.79%
As investment markets move up and down over time, it is important to remember that past performance is not an indication of future returns. Please note that the investment returns shown above have been rounded. This means there may be minor discrepancies when adding to achieve the compound return.^The Conservative and Combined Shares investment options are available in Executive Super and Select Super only.*Returns are per annum.
Transition to retirement [TTR] returns as of 31 MARCH 2019
Stab
le
Cons
erva
tive
Bal
ance
d
Gro
wth
Com
bine
d Sh
ares
Cash
Bon
ds
[fixe
d in
tere
st]
Pro
pert
y
Aus
tral
ian
Shar
es
Inte
rnat
iona
l Sh
ares
Monthly 0.60% 0.79% 0.79% 0.80% 0.96% 0.18% 1.35% 0.52% 0.44% 1.46%
FYTD 2.49% 2.90% 2.56% 2.65% 2.19% 1.54% 4.17% 4.32% -0.32% 4.67%
Rolling 1 year 4.04% 4.81% 6.15% 7.33% 7.90% 2.04% 4.46% 6.86% 7.10% 8.69%
Rolling 3 years* 5.89% 6.95% 10.02% 12.11% 13.19% 2.26% 3.85% 13.05% 11.36% 14.66%
Rolling 5 years* 5.75% 6.57% 9.23% 10.87% 10.88% 2.53% 4.79% 12.65% 9.72% 11.92%
Rolling 7 years* 6.35% 7.94% 10.46% 12.05% 12.70% 3.09% 5.17% 10.76% 11.27% 14.26%
Rolling 10 years* 6.81% 8.17% 9.78% 11.12% 12.43% 3.32% 7.36% 8.20% 11.53% 13.30%
As investment markets move up and down over time, it is important to remember that past performance is not an indication of future returns. Please note that the investment returns shown above have been rounded. This means there may be minor discrepancies when adding to achieve the compounded return.*Returns are per annum.
360° | intrust360.com.au [ 9 ]
Super Stream returns as of 31 MARCH 2019
Stab
le
Cons
erva
tive
Bal
ance
d
Gro
wth
Com
bine
d Sh
ares
Cash
Bon
ds
[fixe
d in
tere
st]
Pro
pert
y
Aus
tral
ian
Shar
es
Inte
rnat
iona
l Sh
ares
Monthly 0.69% 0.92% 0.90% 0.91% 1.10% 0.21% 1.57% 0.59% 0.50% 1.65%
FYTD 2.90% 3.30% 2.92% 2.88% 2.49% 1.81% 4.93% 5.02% -0.26% 5.16%
Rolling 1 year 4.59% 5.52% 7.02% 8.12% 9.05% 2.39% 5.27% 7.80% 8.17% 9.71%
Rolling 3 years* 6.18% 7.38% 10.50% 12.59% 13.92% 2.46% 4.19% 13.66% 11.99% 15.41%
Rolling 5 years* 5.92% 6.82% 9.51% 11.16% 11.32% 2.66% 5.00% 13.01% 10.09% 12.36%
Rolling 7 years* 6.48% 8.13% 10.67% 12.26% 13.02% 3.18% 5.32% 11.02% 11.54% 14.58%
Rolling 10 years* 6.90% 8.30% 9.93% 11.26% 12.65% 3.38% 7.47% 8.38% 11.72% 13.53%
As investment markets move up and down over time, it is important to remember that past performance is not an indication of future returns. Please note that the investment returns shown above have been rounded. This means there may be minor discrepancies when adding to achieve the compound return.*Returns are per annum.
[ 10 ] 360° | BUDGET EDITION
Your family and friends may not have the right answers Many of us approach family and friends first when it comes to seeking advice. After all, it can be useful to get a different perspective on an issue you’ve been considering. However, it pays to be cautious about any non-professional financial advice you receive! Here are a few good reasons to consider professional financial advice.
Keeping up to date with regulations Financial advisers must keep up with financial regulations in order to keep their license. What’s more, financial rules change all the time. It’s very hard to keep up to date with everything if you’re not being paid to do so.
So while your neighbour might have some helpful advice to give you about salary sacrificing, she may not realise that a different contribution strategy could suit your financial situation better. Her advice could leave you missing out on Government incentives or tax bonuses.
Knowing the whole story When you pay for financial advice, you will need to disclose all your financial details. Your financial adviser will need to look at information such as your bank statements, loans, tax returns and financial assets to get a complete picture of your financial situation. Only then will they be able to provide advice that best suits your circumstances. On the other hand, you probably won’t be telling your aunt all the nitty gritty details of your personal finances while you chat at a family lunch. So to be completely fair to her, she may not know the whole story when she passes on her advice. She can’t be sure [and neither will you] if her advice might actually put you in a worse position.
Obligations to youYour best friend who works at the bank probably means well when he tells you about the benefits available on a particular credit card. However, he could also have a personal interest in pushing you to use a credit card owned by the bank he works for. Financial advisers have a legal obligation to provide you with advice that is in your best interest. Our financial advisers do not receive commissions, nor does Intrust360° pay dividends to shareholders.
Professional qualificationsPerhaps most importantly, a financial adviser should have professional qualifications in financial services. The book you just read on the best way to manage your finances might claim to be the only money guide you’ll ever need, but it doesn’t take into account your particular situation. It might sound like good advice, but can you be sure it will suit you? What worked for the author may not necessarily work for you.
Your advisers are here to helpIf you are looking for some qualified, experienced and professional financial advice, the financial advisers at Intrust360° can help.
Just call 1300 001 360 or visit intrust360.com.au to book an appointment.
360° | intrust360.com.au [ 11 ]
More flexibility for retirees In one of the few weeks that Parliament has sat prior to the upcoming election this year, the Government managed to get a few key pieces of legislation through. Many of these new rules could help to improve financial situations for many retirees, Pensioners and Intrust360° clients.
Intrust360° financial adviser Craig Chalmers provided 360°Magazine with some great examples to help you understand the new legislation.
[ 12 ] 360° | BUDGET EDITION
Intrust360° is at your serviceIf you have any questions about the new rules for retirees, or need any assistance in implementing a new strategy, the financial advisers at Intrust360° can help. You can book an appointment by calling 1300 001 360 or by visiting intrust360.com.au.
Encouraging part-time workFrom 1 July 2019, the Pension Work Bonus will be increased from $250 to $300 fortnightly payments. The eligibility of the Work Bonus will also be expanded to include earnings from self-employment.
Intrust360° member, John, age 69, works part-time as a bus driver and is currently receiving Age Pension. John is single and has $100,000 in his super account and no other assets except his own home. He currently earns $770 per fortnight. John’s employment income is assessed by Centrelink, but based on the current Work Bonus amount, his assessable fortnightly income is reduced by $250 to $520.
Come 1 July, John’s fortnightly assessable employment income will be reduced by a further $300 to $470. This translates to John receiving an additional $25 per fortnight of Age Pension.
“The increase to the Work Bonus will mean John is $650 better off per year,” Craig says.
“The change can make a huge difference to the lifestyle of an Age Pensioner with a limited super balance to draw down on.”
Craig says the changes will also benefit those who haven’t previously been able to claim the Work Bonus due to being self-employed.
“It’s a great opportunity for hard-working business owners to be able to increase their Pension payments,” he says.
Sorting finances after retirementThe work test will be simplified after 1 July 2019 to allow recent retirees, with low super balances, an extra 12 months to contribute to super before they need to satisfy the work test.
The current work test prevents anyone aged 65 to 74 from contributing to super unless they have been employed for at least 40 hours in a 30 consecutive day period in the financial year.
Craig explains that the current rules make it hard for recent retirees to prepare their finances after retirement.
“Take, for example, someone over 65 who finds themselves retiring much earlier than originally planned”, he says.
“If they can’t pass the work test, they can’t contribute to super.
“When you can’t contribute to super, sorting out your finances for retirement can be pretty difficult.”
After 1 July 2019, anyone with less than $300,000 in super and who has satisfied the work test in the previous financial year will be able to make voluntary contributions to super.
“The new rules will allow recent retirees some flexibility in organising their finances after their retirement,” Craig explains.
“The additional 12 months will make preparation for retirement much easier, especially if someone has had to retire unexpectedly.”
Increasing flexibility of retirement income streamsAny lifetime income stream products purchased after 1 July 2019 will become partially exempt from Centrelink’s Age Pension assets test. These income stream products, commonly called annuities, will now be assessed at 60 per cent of their purchase price.
Craig says this could prove useful for those who are hoping to gain access to the Age Pension but don’t qualify due to the assets test.
“Obviously this does depend on an individual’s financial situation, but it could be possible for some people to purchase a new lifetime income stream in order to reduce their assessable assets,” he says.
“In some cases, this may help people access the Age Pension if they are currently exempt due to the assets test.”
The rules around annuities and lifetime income stream products are quite complex and entirely dependent on your financial situation. Craig warns that while some people will benefit from opening a new annuity under the new rules, others could actually be worse off by doing so. If you are interested in finding out whether you should purchase an annuity, Craig strongly recommends that you speak to Intrust360°.
“A financial adviser will be able to properly assess your financial situation and recommend an option that could be beneficial to you,” he says.
360° | intrust360.com.au [ 13 ]
Advice on super?JUST A PHONE CALL AWAY!Would you like some super advice, without taking the time to make an appointment with a financial adviser? We can help! Intrust360° members can now receive simple super advice from our qualified financial advisers straight over the phone! Access high-quality, low-cost financial advice through Phone360°.
Call 1300 001 360 or visit intrust360.com.au to find out more.
