Three ease-of-living benefits for retirees announced from the budget 🙂
Will you be better off as a result of Josh Frydenberg’s latest budget?
A lot of Australians will be as a result of a six-month cut in fuel excise and once-off $250 once-off welfare payments. In addition, the government also announced the extension of the minimum superannuation drawdown which provides some added benefit to retirees.
Here is more detail.
The $250 cost-of-living payment
First up, if you’re on a government payment, you could be eligible for a one-off “cost-of-living payment” worth $250, as a key measure in last week’s federal budget.
Pensioners, carers, veterans, job seekers and other eligible concession cardholders, plus some self-funded retirees, will receive a one-off payment of $250.
Services Australia suggest the first payment will be paid on 28-April. The $250 amount will be paid automatically, meaning you don’t have to apply or do anything to get it if you’re eligible.
The payment will be given to eligible recipients of the following schemes, and to concession card holders:
- Age Pension
- Disability Support Pension
- Parenting Payment
- Carer Payment
- Carer Allowance (if not in receipt of a primary income support payment)
- Jobseeker Payment
- Pensioner Concession Card (PCC) holders
- Commonwealth Seniors Health Card holders
- Eligible Veterans’ Affairs payment recipients
- Veteran Gold card holders
The $250 payment will be exempt from taxation and will not count as income support for the purposes of any income-support payment.
You’ll only be allowed to receive one payment, even if you’re eligible under two or more categories.
Fuel excise cut by 50 per cent, for six months
Secondly, you would have noticed the price of petrol has dropped in the last week. As part of the Federal Government’s 2022 Federal Budget unveiling, the government’s excise on fuel will be halved, saving motorists 22.1 cents per litre of unleaded and diesel fuel. The initiative was announced and came into effect at midnight on March 29, and will stay in place for six months to September 28.
The reduction in the excise will see motorists save roughly $15 when filling a 60-litre tank of unleaded fuel.
Treasurer Josh Frydenberg said the tax cut should flow through to prices at the bowser over the next two weeks.
“For the next six months, Australians will save 22 cents a litre every time they fill up their car,” he said.
“A family with two cars who fill up once a week could save around $30 a week, or around $700 over the next six months.”
The government said competition watchdog, the ACCC, will keep an eye on petrol retailers to ensure they pass the lower excise rate on to motorists.
The measure will cost the government $3 billion.
What is fuel excise?
In short, fuel excise is used to help pay for our roads. Like almost all federal taxes, fuel excise goes into the Government’s general revenue, which is then drawn upon to fund our transport infrastructure. It is the contribution that you, as a motorist, make to the development and maintenance of our road transport system. Australian motorists currently pay excise worth 44.2 cents on every litre of petrol or diesel they buy.
50 per cent reduction in minimum superannuation drawdowns extended
The government has extended the 50 per cent reduction of the superannuation minimum drawdown requirement for account-based pensions and similar products for a further year to 30 June 2023.
The minimum drawdown requirements determine the minimum amount of a pension that a retiree has to draw from their superannuation in order to qualify for tax concessions.
Drawdown rates range from 4 per cent to 14 per cent, depending on age. The extension of the halved rate would drop the rate from 7 per cent to 3.5 per cent for someone aged between 80 and 84.
While the budget billed this measure as “supporting retirees”, experts clarify that it would really only benefit retirees who have already accumulated substantial wealth outside super.
“The extension allows individuals who have access to outside funds to withdraw less than they would ordinarily have to under the normal policy conditions. Meaning you can retain more in their super pension account – which is tax-free – for longer,” says Peter Burgess, deputy chief executive of the SMSF Association.
Wealth held in a super fund in pension mode incurs no tax on income and capital gains, she points out – as opposed to income held in an individual’s name, which is taxed at marginal rates.
But tax advantages are not the only potential benefit. The extension of the minimum drawdown also provides “continued flexibility” on how much retirees need to withdraw to fund standard of living.
Aside from tax efficiencies, leaving more money in super means more can be invested, generating further returns.