Federal Budget Update 2022/23

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The Federal Government made no major announcements about superannuation in its Budget but offered assistance for ‘downsizers’ and pensioners.

Labor's 2022/23 Federal Budget has a key focus on economic recovery and reducing the costs of living, with no major announcements around superannuation.

It’s important to remember that the budget measures outlined need to be legislated before they come into effect.

Incentives for older Australians to downsize the family home

The government is proposing to lower the eligibility age for making downsizer contributions to superannuation from age 60 to 55. This was passed on 28 November 2022 and it becomes effective from 1 January 2023.

The downsizer contribution allows people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home. Both members of a couple can contribute, and contributions do not count towards non-concessional contribution caps.

The asset test exemption period on the sale proceeds – when income-support recipients sell their principal residence – is proposed to be extended from 12 months to 24 months. This will give pensioners more time to purchase, build or renovate a new home before their pension is affected.

As a further incentive, it is also proposed that there will be changes to the income test so that only the lower deeming rate of 0.25 per cent is applied to principal home sale proceeds when calculating “deemed income” for 24 months after the transaction.

Commonwealth Senior’s Card income threshold increased

The income threshold for the Commonwealth Seniors Health Card is proposed to increase from $61,284 to $90,000 for singles and from $98,054 to $144,000 (combined) for couples. Cardholders are entitled to cheaper healthcare and other discounts.

Deeming rates frozen for another two years

The Government proposes to freeze social security deeming rates at their current levels for a further two years until 30 June 2024, to support older Australians who rely on income from deemed financial investments, as well as the pension, to deal with the rising cost of living.

Work more without reducing the Age Pension

The “Work Bonus income bank” offsets future income from work that would otherwise be assessable under the Age Pension income test.

The Government has proposed an increase to the amount of money an Age Pensioner can accrue in their “Work Bonus income bank”. This means pensioners can earn more money from working before their pension is reduced. In 2022-23 it is proposed the amount will increase from $7,800 to $11,800.

The income bank amount is not time limited; if unused, it carries forward, even across years.

Super funds encouraged to invest in affordable housing projects

The Government plans to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments and other key stakeholders such as super funds.

This could include making investing in social housing projects more attractive to super funds by covering the gap between subsided and market rents.

Further increases to Age Pension expected

Twice a year, welfare payments are examined to ensure they are keeping up with the cost of living.

Pensions were already boosted in September, with the maximum rate of pension increasing to $1,026.50 a fortnight for singles and $773.80 for each member of a pensioner couple.

Payments will be examined again in March 2023 but, with the Treasurer ensuring extra funds are ready in the budget, it is anticipated payments will lift again.

Women’s Budget Statement acknowledges super gender gap

The Budget notes that factors such as the gender pay gap, time out of the workforce due to caring responsibilities, and lower participation and hours worked are all forms of women’s economic inequality that have lifelong impacts. They also contribute to women retiring with around half the super of men.

The Government’s proposals include extending the paid parental leave scheme and measures to achieve pay equity that are designed to help to address workforce participation and the gender superannuation gap. TelstraSuper welcomes this focus on achieving equal economic outcomes.

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Any general advice has been prepared without taking into account your objectives, financial situation or needs. Before you act on any general advice, you should consider whether it is appropriate to your individual circumstances. Before making any decision, you should obtain and read the relevant Product Disclosure Statement and Target Market Determination or call us on 1300 033 166 for copies of these documents. You may wish to consult an adviser before you make any decisions relating to your financial affairs. To speak with an Adviser from TelstraSuper Financial Planning call 1300 033 166.