The Federal Budget and Retirees
Wednesday, October 07, 2020
The majority of focus in the Federal Budget 2020 is on economic stimulus, business support, employment growth and long term recovery. Though by no means the priority, there are a few helpful changes for self-funded retirees.
Not much change for self-funded retirees in regards to retiree financial planning advice
There isn’t much proposed for self-funded retirees except for the hope of roll-on benefits from a stimulated economy with the view to increases in company success, share prices, and property/rental values which will ultimately benefit retirement investment strategies.
The increase in tax thresholds may benefit some retirees who receive additional or investment income of over $37,000 a year, as the upper tax thresholds have increased. For example, the 19c upper tax threshold has been increased from $37,000 to $45,000 for the 2020-21 financial year.
In addition, the Low Income Tax Offset (LITO) which was legislated to increase from the current $445 to $700 starting from 1 July 2022, has now been proposed to be brought forward to 1 July 2020. This means if you qualify, the offset is taken off your total income for that financial year, thereby reducing your overall tax due.
Earlier in the COVID lockdowns, the Government halved the superannuation minimum drawdown requirements for account-based pensions and similar products for the 2019-20 and 2020-21 income years. As a result, self-funded retirees can, if they choose, reduce the income from their investments and therefore maintain their capital for longer.
Age Pension Recipients Receive a Bonus
If you are in receipt of an Age Pension or other qualifying payment or concession card, the Government has proposed two $250 ‘economic support payments’- one in December 2020 and then another in early March next year. Again this measure is to stimulate spending and the economy.
Superannuation Fund Responsibilities
There are proposed new monitoring and obligations for ‘MySuper’ package providers to ensure they meet a set benchmark of performance and service. If retirees are choosing these kinds of standard superannuation investments then there may be some reassurance in this.
The government is funding an extra 23,000 home care packages. This means more retirees over 65 years old, who require lifestyle and health care support to stay living in their own home, will have the opportunity to receive one of these packages.
Since February this year the Australian economy and individuals have undergone shock and restrictions. No one could have anticipated the length and depth of the COVID crisis and all that has meant for our country as a whole. At the same time, we have fared comparatively well in the Global scheme of things. The 2020 Budget provides much needed relief and support to business and households to begin on the road to recovery.
For non-working retirees it is more a view to the long-term benefits of living and investing in a recovering economy rather than receiving anything significant in immediate benefits from the Budget.
These are times to be well advised for your best retirement income and retiree financial planning investment strategies. We strongly recommend the expertise of a Sunshine Coast Financial Advisor to navigate your way. Please feel free to contact our Maher Digby Nambour financial planners to disuss your retirement financial planning options for Sunshine Coast and the Wide Bay area.
As always, the Budget proposals are required to pass any necessary legislation within the Australian Parliament before they are implemented.
For more Information contact Mark Digby Financial Adviser at Maher Digby Securities Pty Ltd - Financial Advisers – AFSL No. 230559 Ph: 07 5441 1266 The information contained in this article has also been devised from the 2020 Federal Budget Papers, Ministerial statements, associated materials, and our interpretation of them. This document is to be used as general retiree financial information only and should not be considered a comprehensive statement on any matter and should not be relied upon as such. This document has been prepared without taking into account any individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking with your financial adviser before making a financial investment decision.