New life expectancy figures carry tax burden
People who commence income stream products from this year face an increased tax burden and a potential fall in the age pension under new Federal Government actuarial life tables.
The tables, which came into effect from January 1, increase the official expected lifespan of males post retirement at 65 by 1.49 years to age 82.7, up from 81 years in 2004.
The corresponding lifespan of females has been increased by an additional 1.27 years to 86 years, up from 84.9 years last year.
Barbara Smith, chief executive of onlinesuper.com.au, said the increase means people with a life-expectancy-based pension or annuity, such as an allocated pension, will pay more tax for the rest of their lives or until the pension or annuity runs out. Not only that, they can also receive less age pension.
“Most people feel happy when the Government actuary tells us that Australians are living longer, but the person who feels happiest is undoubtedly Treasurer Peter Costello,’’ Smith said.
As an example of the greater tax burden, she said that where a person starts an allocated pension in 2005 with $300,000,including $200,000 of undeducted contributions, a male will pay tax on an additional $18,372 income over the 17.7 years of life expectancy, compared to someone who started the annuity on 31 December 2004. A female will pay tax on an more than $48,960 in additional income over the 21.15 years to age 86 years.
As the life expectancy tables are also used to calculate the age pension, she said, this can fall based on the income test, Smith said.
She added that because women have a higher life expectancy than men they will actually lose more of the age pension than men because their exempt income is a lot less.
“Its grossly unfair that women get a lesser age pension just because some women happen to live longer,” she said.
Recommended for you
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
The Senate economics legislation committee has recommended Schedule 1 of the Delivering Better Financial Outcomes legislation be passed as it is a “faithful implementation” of the recommendations.
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
