For many of us, we are able to contribute to superannuation for our entire working lives. Thanks to the superannuation guarantee arrangement, employers are obliged to contribute a minimum percentage (currently 9.5%) of your earnings to your nominated super fund. While this might seem like a lot, depending on your ideal cost of living in retirement, you may wish to contribute additional money to boost your savings. One way of doing this is through salary sacrificing.

Salary sacrificing is where you establish an arrangement with your employer to pay a portion of your pre-tax salary to your super account as a concessional contribution. There are a few benefits to this:

• Boost to your overall contributions to your super fund
• Reduce your taxable income, therefore, paying less tax
• Works as a forced saving so you don’t need to worry about putting money away to contribute later

To show you how this could work for you, here’s an example for someone earning $90,000 p.a.:

The above example shows how your after-tax pay would be affected if you salary sacrificed $10,000 in one year, the difference is $6,550 per year or $126 per week. If this looks too much for your circumstance, perhaps consider reducing your super contributions to $5,000. Now your take-home pay is $64,658, therefore an after-tax reduction of $3,275 per year or $63 per week.

Salary sacrificing is a great tool to help boost your super savings, however, there can be some traps for young players. Be sure to speak with your financial adviser to establish how salary sacrificing can best work for you.

Please note this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored superannuation or financial advice, please contact us today. One of our advisers would be delighted to speak with you.

Read more articles in our Financial Literacy series. 

Superannuation is something you simply cannot ignore. It is important that you engage with it throughout your working life, monitor how much you have and how it is invested.  So, let’s take a look at how superannuation impacts you as it progresses through various life stages.  From your first paycheck to the last, the contributions to your superannuation are building to finance your retirement.

First job

When you begin your first job, your employer is likely to direct your compulsory superannuation guarantee contributions into the fund that they use as a default (typically an industry superannuation fund).  It is important to note you have the choice of the superannuation fund that is used and you do not need to accept the default, but if another choice is made, you will require providing detail of the fund to your employer.

Employers MUST pay superannuation to an employee at a rate no less than 10.5% of the ordinary time earnings if you are over 18 or if you are under 18, but working more than 30 hours in a week.

The superannuation guarantee is for employees irrespective of work conditions, whether they are full-time, part-time or casual.

Superannuation guarantees are typically paid from each pay cycle, however, employers may choose to pay at least every 3 months.

Early work years/young family

It is a long time before you can access this money by meeting a typical condition of release, but remember that it is accumulating for your retirement and you should stay on top of what is happening.

Make sure that you have all your contributions going into one fund. When you commence a new job, you need to advise your employer of the fund details so that contributions continue to go into said fund.  In most cases, you will have a choice as to where your contributions are paid but possibly not if you are a government or university employee.  If you think a job has paid to a different fund, search for lost superannuation and roll them into one. Fewer admin fees mean more returns for you.

Check your statement each year:

• How much have you paid in administration and other fees?
• What has the performance been and can you compare it to another fund to see if it is keeping up?
• Is the chosen investment option still the right one for you?
• Are you paying premiums for insurance?
• Is the insurance sufficient or should you obtain other insurance possibly outside superannuation?
• Do you have a current beneficiary nominated?

This period in your life is likely to be the most financially challenging – marriage, children, mortgages and your career. For women, there may be a period out of the workforce while raising children and it is worth exploring paid parental leave with your employer to ensure you continue to build your superannuation for retirement through this period.

All of these issues mean that you may not be able to add to your superannuation from your resources and paying down your mortgage will be the highest priority, but you should attempt to allocate an extra amount to superannuation from your salary each pay period.  Settle on a small amount you will not miss, even if it is $10 each week.  As you age, try to increase this amount (i.e. if you get a pay rise, add extra to your superannuation contributions).  The most tax-effective way to contribute is via salary sacrifice – pre-tax salary, but you can also add from your resources.

You might consider seeing a qualified professional to review your financial situation and help you reach your future goals. If an industry fund is in use, does it meet your requirements? Do you want more say in your investments? Does the industry insurance meet your requirements?

In your 50’s and 60’s – approaching retirement

By now, your financial situation should be a little easier. Perhaps the kids have finished university/have jobs and left home and your mortgage is well under control (provided the interest rates do not stay up). Your superannuation balance will look healthy, and guess what, retirement isn’t so far away any more.

If you have not consulted a qualified professional, now is a good time to set some financial strategies in place so that your future needs can be met.

You might be thinking of some things you would like to do when you have more time and travel may be on top of the list.

Now is the time when you need to contribute as much as you can spare and that you will not need before you reach ‘preservation age’ – the age at which you can begin to draw from superannuation. For most people that is age 60.

Using salary sacrifice now will be a strategy that will work well for you. Part of your pre-tax salary is contributed to superannuation, and your take-home pay and the tax you pay personally will be reduced by maximising this amount if your budget permits. There are other strategies for higher-income earners, perhaps with a non-working spouse.  These include spouse contributions and contribution splitting.

In retirement

Now you have retired and are living off a pension drawn from superannuation. Once commenced, you must draw a minimum percentage from superannuation each year. At 65, this is 5% of your balance, but you may need to draw a greater amount (note the minimum in 2022/23 was reduced by the government to half of this amount due to the COVID-19 pandemic but it is to increase back to 5% from 1 July 2023).

It is vital that you manage your superannuation, or have it managed by a qualified professional so that what you have will last you for at least your life expectancy.  A male at age 65 can expect another 18.5 years based on typical life expectancy, so you need to watch and plan your spending.  At the time of writing, a couple wanting to live a comfortable lifestyle will need about $68,000 per year between the ages of 65 to 84.  This means that you will need to have accumulated nearly $640,000 to meet this need, along with receiving Centrelink age pension and that takes you to your life expectancy (Source – Association of Superannuation Funds of Australia – ASFA).

What happens if you live longer than your life expectancy? What happens if you need aged care?

These things mean that you will need to accumulate a greater amount of savings through your working life so that these needs in later life can be met comfortably and without placing stress on yourself or your family. The alternative is to reduce your expenses below the comfortable expenses target to something more in line with a moderate standard according to ASFA requiring around $44,000 per year for a couple.  Taking care of your superannuation through your working life will benefit you at the time that it is most needed.

Please note, this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

Introduced in 1991, superannuation is money paid into a long-term savings and investment account to provide for your retirement. Employers are required to pay 10.5% of your salary into superannuation. This was increased on July 1 2022 and will continue to increase by 0.5% each financial year until it reaches 12%.

While working, your superannuation is in the accumulation phase. During this period, your superannuation is inaccessible and continues to grow to fund your retirement. During the accumulation stage of superannuation, all contributions and investment earnings are taxed at 15%. Your superannuation will remain in accumulation phase until you reach the preservation age between 55 and 60 (depending on your date of birth). When you reach preservation age, you can access your superannuation.

Employees mostly have a choice as to which fund their contributions are paid. Some government employees do not have this choice as their contributions will be paid to a government fund. When starting a new job, provide your superannuation account details to your employer with a request to have contributions paid into that fund. If you do not nominate a fund, the employer will pay it to the default fund. Over time and with job changes, you may end up with multiple accounts. This is not a good idea as you may be paying extra fees and insurance premiums in each of the funds. This may lead to reduced benefits or a reduced superannuation balance.

When you join a fund, you can select life, total and permanent disablement and/or income protection insurance as part of your membership. The fund will disclose the premiums you will pay from the balance of your account. Depending on your age and stage of life, having insurance inside your superannuation is important. However, this is not always the most suitable option, and you should seek advice from a qualified professional to ensure your insurance cover is appropriate.

While your superannuation benefits are accumulating, your chosen fund manages the investment of your benefit, which is pooled with the benefits of many others if you have a retail or industry superannuation fund. Your fund will give you a few different investment options, which include a blend of shares, property and fixed interest. These investment options all hold varying levels of risk and produce different returns. All investments are subject to market volatility, you must be comfortable with the risk level of your investments throughout points of market weakness.

It is a good idea to make additional contributions to your accumulation account when you are in a position to do so. Contributions can be made using your pre-tax or after-tax salary. Contributing pre-tax salary to superannuation is called ‘salary sacrifice’ or ‘personal deductible contributions’. These pre-tax contributions are also known as concessional contributions which are capped at $27,500p.a.

Pre-tax and after-tax superannuation contributions are effective for high-income earners to reduce their income tax. These contributions may not be as effective for those in lower tax brackets. After-tax contributions do not lower your personal tax. These contributions must be made from money that you do not need as you typically cannot access it before reaching preservation age and a condition of release.

Even though your superannuation is not available to you for many years, you should always take an interest and monitor your balance.  It is real money and will matter when you enter retirement. When you enter retirement, you can convert your accumulation account into ‘pension phase’ and draw a pension or withdraw your superannuation as a lump sum. Once you get to this stage, you will be pleased that you have nurtured your account throughout your working life.

To learn more about how we can help you plan for retirement and manage your superannuation, please visit our Self-Managed Superannuation Fund (SMSF) page.

Please note, this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

No doubt you are aware of the Labor Party policy that if elected at the next federal election they will no longer permit unused franking credits to be refunded to taxpayers and self-managed super funds (SMSF’s) in pension phase.  You may also be aware an exemption has been provided to Age Pension recipients.

The planning for retirement for many SMSF’s was done so on the premise that excess franking credits would be received to supplement investment earnings the fund’s assets generated.  This effectively would result in the return on equities paying fully franked dividends to be increased by 30% or the amount of company tax that was paid on that profit the company has decided to distribute to you.

Many of our client’s portfolios hold shares in CBA (Commonwealth Bank) which has a current yield of 5.95%.  The dividends CBA pays are 100% franked which means the true yield to a taxpayer entitled to receive a refund of those franking credit becomes 8.5% (5.95% / 70% * 100%).  A rather compelling reason to hold CBA in this low-interest rate environment some might argue…but that’s for another time…

Let’s assume you have a 2 member SMSF that is in full pension phase and you are not eligible for the Age Pension.  Let’s also assume the SMSF’s portfolio receives $30,000 of fully franked dividend income which once grossed up for franking results in a total dollar return of $42,857.  An additional amount of $12,857 or 30% of the total return has been received due to the refunding of the franking credits.  Under Labor’s policy, the $12,857 will be lost!!

One interesting change in the SMSF landscape happens on 1 July 2019.  From that date, the membership rules of an SMSF change in that the number of members permitted will increase from 4 to 6.  What does this have to do with my SMSF losing my franking credits I hear you say? Well, a lot!!

A strategy worth considering is increasing the number of members in your fund to include those in accumulation phase because the earnings attributable to their member accounts will be taxed at the rate of 15%.  The advantage of this strategy is; rather than lose an entitlement to receive those franking credits altogether, they can be offset against the tax raised against the income attributable to the members in accumulation phase.

A further advantage of adding members in accumulation mode into the SMSF is their taxable contributions are not pro-rated.  This means the contributions tax of 15% levied on those concessional/taxable contributions can be also be soaked up by franking credits to mitigate the net tax position.As you can see for the hypothetical example above, by including members into the SMSF who are in accumulation mode, part of the franking credits can be used to reduce any potential tax liability to nil.  Whilst this is not as advantageous as receiving a full refund of those excess franking credits there is a minor advantage gained in reducing the amount of tax the SMSF pays overall.

As the great Kerry Packer said at the House of Representatives Select Committee on Print Media way back in November 1991:

“I pay whatever tax I am required to pay under the law, not a penny more, not a penny less…if anybody in this country doesn’t minimise their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.”

Please note this article only provides general advice, it has not taken your personal or financial circumstances into consideration. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

What if I run out of money?

“I read in the paper on the weekend that more and more retirees are actually running out of money. I am really worried that this will happen to me.”

There are many factors involved in answering the implied question. We know that:

• Life expectancy for our population is rising every year – we are living longer.
• Centrelink thresholds have changed and therefore excluded many retirees from receiving a benefit payment.
• Interest rates are at all-time lows.

We know the stockmarket is volatile and we are only 10 years on from the Global Financial Crisis (GFC) that had a major impact on wealth. We are still nervous about putting our money into this environment because of the risk of losing it.

So instead of that, we are putting our money into the bank.  Did you know that the average term deposit rate since 2004 (all terms, all institutions: source RBA) is 3.45%?

Looking at an average Balanced portfolio of investments, the annual compounded return since inception in 2004 has been 6.62%.  This period includes the GFC-affected years.

This means that if you had invested $50,000 into a Balanced portfolio of investments, reinvested dividends and other earnings, and did not take anything out of it apart from portfolio management fees, you would now be sitting on about $126,000.

If you had taken the same amount and invested it in a Term Deposit at the same time, drawing nothing and not paying any management fees on it, you would now have just under $81,000.

Tell me which of those clients is going to run out of money first if they began drawing a payment from it?

We forget that one of the greatest risks we can take is that our money is simply not earning enough to allow it to support the lifestyle we desire. They have replaced what they see as investment risk with risk of another kind – the risk of running out of money.

There is no question in my mind that we should be properly investing our money in a portfolio that best suits our risk tolerance, rather than sitting it in a term deposit, if we wish to mitigate the risk of running out of money.

Please note that this article provides general advice and has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

This recent article in the Australian Financial Review provided an insight into how some retail and industry super funds are marketing their products as “Balanced” when in reality the profile of the funds looks more like a “Growth” product.

This is misleading in the extreme and something worthy of exploring given a “growth” portfolio carries more risk but will, all things being equal, outperform a “balanced” alternative over the investment horizon more often than not, yet “growth” is marketed as “balanced”.  This has escaped media attention…until now.

The article further supports a fact one of our advisors established earlier this year when a client questioned the performance of the balanced portfolio we constructed and managed with the returns of a “balanced” super fund, which were superior.  Some investigative work revealed the “balanced” super fund was indeed “growth” oriented and more appropriate for the risk tolerant investor.  It was hardly comparing “apples with apples”.

In the low interest rate environment that seems like has been around forever, the returns investors are able to generate from the defensive asset class have been front & centre as a topic for discussion.  The income investors have been able to generate from this asset class has been belted, which has seen an increase of flows into “passive” or index-based investments as investors chase better returns.  However, this “passive” index-based investing artificially inflates the share price of a company whose fundamentals otherwise might suggest they are not performing quite so well.  When global interest rates normalise as has started to happen, all things being equal, companies with poor fundamentals will get sold off, and quickly.  To quote one of the greatest investors in history, “only when the tide goes out do you discover who’s been swimming naked”.

Back on the article…it lists the top 60 performing super funds with an asset allocation of 61-80% into growth assets i.e.; Australian & international equities, commercial property and infrastructure assets.  Some of the funds listed are designed to “hug” the index to keep administration costs down.  Fees are an emotional issue and under the spotlight given the revelations provided at the ongoing Royal Commission.

The problem with index hugging is it involves no active stock picking but rather, capital is deployed into each company comprising the index in line with their weighting thereof.  As indicated above, this can artificially inflate the share price of a poor company you might otherwise not invest in.

The returns shown in the article are net of investment fees & tax but before administration fees and are provided over 1, 5 & 10 years.  The median return of those top 60 “growth” super funds over 10 years is 6.6%, before admin fees.

I thought that was an interesting number as the portfolios I’ve seen since I started with The Investment Collective stacked up very well against that 6.6% median return for “growth”.

Digging into PAS, our portfolio management system, the first growth profile I randomly selected has achieved a return net of fees since inception of 11.26%, the second 7.68%, the third 13.58%, the fourth 7.89%, the fifth 7.54%, the sixth 8.31%, and the seventh 13.96%.

I then wanted to “compare the pair” with how some of our truly balanced portfolios have performed since inception.  The first portfolio has returned 6.18% net of fees, the second 7.35%, the third 7.27%, the fourth 7.25%, the fifth 6.47%, the sixth 6.82%, and the seventh 6.55%.

Whilst the social agenda these days in this instantaneous world concentrates on the “here & now”, with investing, long-term returns are what matter most.  The effect of compounding returns on wealth accumulation over time warrants the need to take a long-term view.

We actively manage client portfolios as many of you already know.  Whilst we don’t get it right 100% of the time, I’ll let you make your mind up on “comparing the pair”…especially so given we provide full transparency around what we do and how we do it.

Please note that this article provides general advice. It has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

There are strategies to ensure your children get the maximum benefits.

Since its inception, many baby boomers have accumulated big super balances. In some cases, their super balances may be approaching, or even exceed, the value of the family home. But unlike the home, which is free of death taxes, super’s 17% death benefit tax applies to adult children. There are, however, strategies to reduce its impact. First, you need to understand;

• Which beneficiaries will be taxed;
• How they will be taxed; and
• What you can do about it.

Basically, no tax is payable on super death benefits directed to your spouse, including de facto, someone financially dependent on you, a child under 18 (or older if a financially dependent student) or someone you have an interdependency relationship with. The rest get taxed.

When your money goes into super, it is broken down into a taxable component and a tax-free component. The taxable component is comprised of all pre-tax contributions (i.e. your employer’s super guarantee, salary sacrifice or any contributions you have claimed a tax deduction on) and the earnings generated on the taxable component. The only proportion that is tax-free is your after-tax non-concessional contributions.

Death benefits tax will only apply to money in the taxable component of super. Tax payable on the taxable component is 15% plus the 2% Medicare levy. The Medicare levy can be avoided if the death benefit is paid through the deceased estate.

One common strategy to minimise the tax is to withdraw an amount from super and recontribute it as a non-concessional contribution. By doing so you, you are converting the taxable component into a tax-free component. The rules are complex so it’s recommended you seek advice. It all comes down to whether you are eligible to take out a lump sum and then whether you are eligible to recontribute it.

Other strategies involve pulling money out of super and into your personal bank account. It is then paid out to the beneficiaries as per the distribution of the Will and there is no tax. This option can be useful especially if you have been diagnosed with a terminal illness. Again, be careful, as there can be tax consequences of pulling large amounts of money out of super and leaving it in your own name.

Given the complexity of the rules, it is vital you get professional advice first.

Please note the above is provided as general advice, it has not taken your personal or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Previously, I highlighted the findings of the Australian Securities and Investment Commission (ASIC) report after reviewing 250 self-managed super funds (SMSF). ASIC does not regulate SMSFs, the Australian Tax Office does and trustees are held directly accountable.

At The Investment Collective, we assess the appropriateness of an SMSF, provide tailored written advice in the form of a Statement of Advice and present the recommendation where you are encouraged to ask questions to better your understanding.

Why should you set up at SMSF?

A client of mine established an SMSF to take back control of their superannuation by removing any influence from large financial institutions and unions. They wanted more investment choices and to be involved when choosing the underlying investments that are appropriate for their risk profile. Both members are now benefiting from the additional income from franking credits.

Another client established their SMSF once we conducted a fee analysis of their previous super fund provider. We highlighted all the fees and additional transaction, operational, borrowing and property costs they were paying. With their new SMSF the client has a very transparent fee structure and is now saving thousands each year. This client had a share portfolio in their name that we were able to directly transfer to their SMSF, increasing their superannuation benefit. We managed their capital gains over a few financial years and transaction costs were cheaper than going through a share broker.

In many instances, our clients’ are surprised how stress-free maintaining their SMSF is. We assist clients to look after and oversee almost all of the administrative tasks. We also connect our clients’ to professional SMSF administrators to complete the annual compliance obligations.

As you can see, there might be benefits to establishing an SMSF depending on your circumstances. The Investment Collective can assist you in an analysis of your current superannuation provider. Please contact us to arrange a review.

Please note this article provides general advice, it has not taken into consideration your personal or financial circumstances. If you would like more tailored advice, please contact us today.

With the close of another financial year upon us, apart from being one year closer to retirement and living the dream than you were 12 months ago, it’s an opportune time to attend to one or all of the following:

1. Give your super a free kick

Now is a good time of the year to make additional contributions into super especially if you intend to claim those contributions as a tax deduction as well as lodging your tax return early in the financial year.

Why is that, you may ask?

Well, any surplus cash you have sitting in a bank account earning an abysmal rate of interest can be contributed into super before June 30 as a “personal” contribution and claimed as a tax deduction.

Providing you haven’t exhausted your $25K concessional contribution cap, that increased tax deduction, all things being equal, will most likely result in you obtaining an increased refund from the ATO once your tax return is lodged and assessed.

The benefits are twofold; you get an increased tax refund which can be directed however you wish whilst increasing the wealth you have accumulating in super.

2. Share the wealth

If you have a partner you should be thinking about your finances together and make the most of opportunities that present.

For instance, if your partner has taken time out of the workforce or is a low-income earner, there’s every chance their super could do with a boost.  If your partner earns below $37,000 you can claim the maximum tax offset of $540 if you contribute $3,000 into their super before 30 June.

You get $540 off your tax bill whilst increasing the wealth accumulating inside super.

3. Check in on your goals

As we traverse life our needs and circumstances change, hence it is important to check in on your life and financial goals every 12 months to see how you’re tracking.

Are you on target for making your dreams a reality or do expectations need to be revised to take account of changes to your circumstances?

In relation to your super, at the end of the day, your super is your money.  You are ultimately responsible for how it performs and grows.  You need to ensure it is being invested wisely and in line with the timeframe you intend to access it.

As we enter winter and move another year closer to retirement, check in on one or all of the above…you might just get a good outcome in the future and surprise yourself.

Please note the above has been provided as general advice. If you would like more tailored financial advice, please contact us today. One of our advisers would be delighted to speak with you.

The 2018-19 Federal Budget handed down last week by the Treasurer, Scott Morrison focused more on minor adjustments rather than sweeping reforms. It was a Budget designed to create short sharp election headlines, but there were also many measures that will improve individuals’ financial position.

Below is a summary of three main areas:

1. Superannuation
2. Taxation
3. Social Security & Aged Care

Superannuation

• Super fund membership
  • The maximum number of members allowed in a Self-Managed Super Fund (SMSF) will increase from 4 to 6.
  • SMSF Trust Deed’s may need to be amended.
  • May appeal to some, i.e. intergenerational wealth planning.
  • From 1 July 2019.

• SMSF three yearly audit cycle:
  • SMSFs that have clear audit reports over 3 consecutive years and have lodged annual reports in a timely manner will be able to move to a three year audit cycle.
  • This will reduce compliance costs for some.
  • The Government has undertaken to consult with industry stakeholders.
  • From 1 July 2019.

• Work test exemption:
  • Individuals between 65 and 74 who have super balances below $300,000 will be able to make voluntary contributions in the first financial year following the year that they last met the work test.
  • The measure will provide individuals with low super balances with some additional flexibility and may assist with small business CGT concessions.
  • From 1 July 2019.

• Other items:
  • Individuals earning over $263,157 from multiple employers will be able to nominate that their wages from certain employers be NOT subject to SG from 1 July 2018. Avoids unintentional breaching of the $25,000 concessional contribution cap.
  • Opt-in arrangements for default insurance inside super applying to accounts with balances below $6,000, under age 25 where account has been inactive for more than 13 months,from 1 July 2019.
  • Fees capped to 3% pa on passive fees on super account balances below $6,000 from 1 July 2019.
  • Inactive super accounts with balances below $6,000 to be transferred to the ATO.

Taxation

The Government will introduce a seven year Personal Income Tax Plan over three stages:

1. Targeted tax relief to low and middle income earners

• Low and Middle Income Tax Offset (LMITO)
• Effective date: 1 July 2018 – 30 June 2022.
• Received as a lump sum on assessment after an individual lodges their tax return.
• The benefit of the offset is in addition to the existing Low Income Tax Offset (LITO).

2. Protecting middle-income earners from bracket creep

• Effective date: 1 July 2018 – 1 July 2022
• Affects those individuals on middle incomes

3. Ensuring Australians pay less tax by making the system simpler

• The 37% tax bracket will be removed entirely.
• Effective date: 1 July 2024

• Other items:
  • Retaining the Medicare Levy at 2%
  • Extension of $20,000 instant asset write-off for small business
    • This measure allows small businesses with a turnover of less than $10m a tax deduction for the purchase of assets worth up to $20,000. It was due to end 30 June 2018. It has been extended for 12 months to 30 June 2019.

Social Security

• Increase to the Pension Work Bonus (PWB)
  • The PWB is an income test concession for Age Pensioners who continue to work.
  • Currently, the first $250 of employment income per fortnight is not counted under the Centrelink income test.
  • From 1 July 2019, the Government proposes to increase this to $300 per fortnight (first increase since 2011).

• Expansion of the Pension Loans Scheme (PLS)
  • From 1 July 2019, the Government proposes to make the PLS available to full and part pensioners as well as self-funded retirees of age pension age.
  • Full rate pensioners will be able to increase their income by up to $11,799 (singles) or $17,787 (couples) per year by unlocking the equity in their home.
  • The current PLS interest rate of 5.25% pa will apply.
  • Only fortnightly pension payments are available (not lump sum amounts).
  • Repayments generally occur from the sale proceeds once the house is sold, however, it can be repaid at any time.

• Improving access to residential and home care
  • The Government proposes creating 14,000 additional high-level home care packages over the next four years.
  • It is also proposing to release 13,500 residential aged care places.