The Latest From The Federal Budget On Superannuation, Pensions & More

The Federal Budget was handed down last week (14 May), with several announcements pertaining to the superannuation industry and pensioners.

Social Security Deeming Rates

The Social Security deeming rates, crucial components of the income assessment for Centrelink benefits such as the age pension, are slated to remain unchanged for the next year until June of the following year.

Deeming, the method employed by the government to calculate earnings from financial assets like shares and superannuation, determines how much pensioners earn. Should the actual returns exceed the deemed rate, the surplus isn’t factored into the pension income test.

This freeze, according to the government, aims to assist approximately 876,000 individuals receiving income support, including approximately 450,000 age pensioners. These beneficiaries, reliant on both investment income and government payments, will benefit from the stability of deeming rates amid the challenges posed by living costs.

If the government had lifted the deeming rates, it would have meant 876,000 income support recipients, more than half of whom are on the aged pension, likely would have seen a fall in welfare payment.

Superannuation Paid On Parental Leave From 1 July 2025

Starting from July next year, superannuation will be provided in addition to  Commonwealth-funded paid parental leave.

The implementation of this scheme will require $1.1 billion over four years, with an ongoing expenditure of $623.1 million annually.

The issue of superannuation has been highlighted as a significant factor contributing to gender pay disparity. Women, who typically take more parental leave, often experience a reduction in super contributions during this period, leading to lower retirement savings on average.

This initiative builds upon the government’s efforts to extend the duration of paid parental leave under the Commonwealth scheme to 26 weeks by mid-2026.

The Douglas Decision’s Impact on Social Security Means Testing:

The Government has allocated funding to enact a social security means test framework to address the implications of the Federal Court’s ruling in Commissioner of Taxation v Douglas [2020] FCAFC 220. 

This strategy ensures that the Douglas decision does not alter the rates of income support payments for veterans who receive invalidity payments from the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme, maintaining consistency with the pre-Douglas arrangements.

Recalibration of the Fair Entitlements Guarantee Recovery Program:

Additionally, the Government plans to adjust the Fair Entitlements Guarantee Recovery Program to pursue outstanding superannuation entitlements owed by employers undergoing liquidation or bankruptcy, effective 1 July 2024.