2015 Federal Budget - SMSF perspective

Overall comment
After being bitten and not achieving its goals in the last Budget, the Government has decided to address the Budget Deficit by means of bracket creep (increasing the tax take as salaries increase and move into higher tax brackets) rather than material, painful and significant spending cuts.  This will only work if salary inflation occurs, there are no external shocks to the financial system and future spending can be constrained.  Also, this solution will take longer to address the deficit issue.  So the deficit problem will, in some distant financial year, be solved if there are all green lights and no bumps.

A brief summary of the changes (as announced in the Budget) relating to superannuation and retirement income streams is set out below.

Trustee penalties going up
The dollar value of each penalty unit will increase from $170 to $180 with effect from July 2015.  Consequently, the maximum penalty for failing to sign the ATO Trustee Declaration will increase from $8,500 to $9,000, as the maximum penalty is 50 penalty units.

Asset test changes
The Government will now not be proceeding with the previously announced decision to change the assets test free area and the deeming threshold.

In last year’s Budget the Government had proposed that the deeming thresholds be reset (ie reduced) from the current threshold of $46,000 to $30,000 (single threshold) and reset (ie reduced) from the current threshold of $77,400 to $50,000 (couples threshold).  These changes were to take place from 1 September 2017.

Also, in last year’s Budget the Government had proposed that the asset test threshold (being the threshold at which the pension reduction commences) was to be frozen for three years from 1 July 2017.

Essentially, these measures could not pass the Senate and are therefore being abandoned.  Consequently, the proposed sharpening of the deeming test and the assets test will not now take place.  These thresholds will continue to be annually indexed by reference to the Consumer Price Index.

Relaxation of the medical certificate requirements for benefit access under the terminal illness condition
This change was announced a few days before the Budget and is discussed separately in SUPERCentral News.