2010 Federal Budget - what it could mean for you

Here is a quick summary of the Government’s 2010 Budget proposals that could affect you if you have savings, superannuation, or are saving for your first home. All of these measures have yet to be debated and passed by the Parliament, and most will not take effect for at least a year.

Less tax on your savings

From 1 July 2011, there will be a 50 per cent tax discount on up to $1,000 of interest earned by individuals on bank, credit union or building society savings accounts (and in bonds, debentures and annuity products). For example, a member who earns, say, $900 in interest on a term deposit account in any one year, will pay tax on only $450 of that interest.

More flexibility in the First Home Saver Account

One of the conditions in the First Home Saver Account (FHSA) is to be relaxed. Previously, if a home was purchased before the four year qualifying period was up, the money in the FHSA could not be released, but instead had to be transferred into the individual’s super account. Under the new proposal, if a home is bought by the saver before the end of the minimum four year period, the money must remain in the FHSA, but can be paid into an approved mortgage account once the four years expires. The result is these savings will no longer be locked away till retirement, but can instead be used to pay down the mortgage. This means the FHSA could now be an even more attractive option when saving for your first home, especially since the government contributes 17% of the amount you save each year (capped at $850) and taxes the interest on your savings at a concessional rate.

A boost for superannuation

1) This highly publicised superannuation Budget measure (adopted from the Henry Review) means that the Super Guarantee will rise incrementally from 9% to 12% over 10 years, starting from July 2013. This will significantly boost the retirement benefit of people who expect to continue working for the next few years.

2) People earning less than $37,000 a year who make salary sacrifice contributions to superannuation will be given a rebate of most of the 15% tax payable on those contributions, up to a maximum of $500. The rebate will be paid into the individual’s super fund to help increase their retirement savings, and will take effect in the 2012 -13 retirement year.

3) From 1 July 2012, individuals aged 50 and over with total superannuation balances of less than $500,000 will be able to make up to $50,000 in concessional (ie before tax) superannuation contributions. This doubles the cap of $25,000 which was originally scheduled to apply from 1 July 2012. This means people aged over 50 will get the chance to 'catch up' on their superannuation contributions (especially those who have been out of the workforce for a while) and build up their retirement savings.

4) The Super Guarantee age limit will go up from 70 to 75 from 1 July 2013. If you choose to continue working after age 70, your employer will continue to pay the Super Guarantee for you until you reach 75.


This information has been sourced from the 2010 – 2011 Commonwealth Budget information on the Treasury website.

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