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May 19 2022
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How does this year’s Federal Budget affect you and your super?

The federal government have released the Budget for 2022/23. We’ve done the hard work for you and deciphered what it means for you and your super.
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Just like you’ve got a budget for your weekly grocery shop, the Federal Government has a budget for the country. Although they’ve got a bit more money to spend (read: billions of dollars) the Government is still thinking about the price of milk and bread, also known as the cost of living. This year’s budget has a big focus on easing cost-of-living pressures for Australians.

As for super though, there aren’t many proposed changes. That’s not surprising since we’ve already seen significant changes to the industry in the past two years.

Read on to learn what’s changing in the world of super, and what it means for you.

Extension of minimum pension drawdown reduction

That’s a mouthful! Let’s break this down.

What is the pension drawdown rate?

If you have an account-based pension, each year you need to take out a minimum amount from your pension account as a form of income. This amount is the minimum pension drawdown rate. It’s a percentage of your starting balance on 1 July of the current financial year, and it also depends on your age.

What is the proposal?

To relieve financial pressure on retirees during COVID-19, in 2020 the Federal Government reduced the minimum drawdown rates for account-based pensions and similar products by 50%. This was intended as a temporary measure, but the Government has announced that it would be extended for another year until 30 June 2023.

Given ongoing market volatility, this change will allow retirees to avoid selling assets to satisfy the minimum drawdown requirements.

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Quick tip

You can find the current minimum pension drawdown rates here.

The Superannuation Guarantee will increase to 10.5% from 1 July 2022

The Superannuation Guarantee (SG) is the amount of money your employer must pay into your super account. The SG rate is currently 10% of your ordinary time earnings (OTE), but from 1 July 2022 this will increase to 10.5%. That’s thanks to a bill previously passed by the Federal Government, which requires a 0.5% increase each financial year until the SG rate reaches 12% by July 2025.

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Important fact

Ordinary time earnings (OTE) are what you generally earn for your ordinary hours of work.

Does this mean I’ll lose 10.5% of my wages?

SG payments are covered by your employer and generally they are paid separately to your wages.

For example, say you earn $50,000 a year, your employer will pay an additional $5,250 (10.5%) into your super fund. The $50,000 is all yours, minus any taxes.

Is the SG increase a good thing?

There’s been a lot of debate in the past few years about whether the Government should postpone or cancel the SG rate increase. Here at Rest, we’re pleased that the Government has left the increase in place, as it will significantly benefit members’ balances upon retirement – particularly for women, and workers in part-time and casual jobs with lower incomes.

The Superannuation Guarantee not extended to Paid Parental Leave

Paid parental leave schemes in Australia don’t currently include Superannuation Guarantee (SG) contributions. This means that Australians who take parental leave are not paid SG contributions while on leave… which can, over the long term, leave them with a lower super balance at retirement, particularly for women.

We had hoped the Government would change this, but unfortunately it was not included in this year’s Federal Budget. We will continue to advocate for this measure, as it is significant in improving the super balances of women and addressing the super gender gap.

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Important fact

The average female Rest member aged 60-64 has an account balance of around $90,000, while the average balance for men in the same age band is $123,000.1 This represents a gender super gap of 26%. Learn why we’re advocating for fairer super here.

1 Rest member data as at 31 December 2021.

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