2022-23 October Federal Budget Update – Superannuation
As expected, this year’s second Federal Budget had a strong focus on families, education, health and aged care, energy and affordable housing.
From a superannuation perspective it has been a relatively quiet Budget but there were some welcome announcements that will benefit SMSF members funding their retirement.
Please remember the following budget announcement are not yet law.
Reducing the eligibility age for downsizer contributions
The eligibility age to make downsizer contributions into superannuation is set to be reduced from 60 to 55 years of age. All other eligibility criteria will remain unchanged.
This change will provide a boost to the number of individuals eligible to make a one-off, post-tax contribution to their superannuation of up to $300,000, using the sale proceeds of their family home – regardless of their superannuation balance.
Relaxing residency requirements for SMSFs
Previously announced in the 2021/2022 Budget, the residency requirements applicable to SMSFs and small APRA funds were set to be relaxed through:
- The extension of the central management and control test “safe harbour” from two to five years, and
- The removal of the “active member” test – which would allow members who are temporarily absent from Australia to continue contributing to their SMSF.
Both of these proposals had been slated to commence from 1 July 2022.
The Government has confirmed that these changes, broadly aimed at allowing greater flexibility for SMSF members who are temporarily overseas, are still set to go ahead. However the start date for both measures has been deferred.
Incentivising Pensioners to Downsize
The current Centrelink asset test exemption for proceeds from the sale of a family home, intended for the purchase of a new home, will be extended from 12 months to 24 months.
Additionally, for income test purposes, only the lower deeming rate (currently 0.25%) will apply to these exempted proceeds over the 24-month period.
These changes will allow pensioners more time to purchase, build or renovate a new home before their pension is affected.
Increased Commonwealth Seniors Health Card income threshold
The Government has confirmed its commitment to increase the income threshold for Commonwealth Seniors Health Card eligibility from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples.
This change will increase the number of individuals eligible to benefit from a Commonwealth Seniors Health Card.
Freezing of deeming rates
The Government has also confirmed that it will freeze the social security deeming rates at their current levels until 30 June 2024.
This change will support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.