Interest rates and Superannuation have dominated the media discussion in recent weeks.
As of 7th March 2023 the RBA has again raised the official interest rate to an 11 year high of 3.6% as it attempts to bring inflation under control. Starting in May last year when the interest rate was 0.1%, this now represents the 10th consecutive rate rise.
The bad news for homeowners is that these collective rate rises amount to around a $1200 per month increase on the average mortgage. This is obviously a significant sum in after tax dollars that needs to be budgeted for by the average mortgage holder. On a more positive note, it appears that share and bond markets have at least stabilised of late and the latest interest rate rises were widely anticipated, hence having little or no negative impact on markets.
In other finance discussions, the Government has a difficult path to navigate if it is to pass its proposed Superannuation changes flagged last week. Fortunately for most people this will simply be a point of discussion rather than a financial burden, but for those who may be impacted or who simply would like to understand what the Government is proposing, this is a summary of what they are proposing to change:
- The change will take effect from 30th June 2026
- The aim is to tax earnings on the amounts above $3mil at 30% compared to the current rate of 15%.
- Whilst it will only impact individual balances over $3mil from the above date, this figure will not be indexed to CPI. One important point to note is that whilst treasury has indicated that this will only impact a small percentage of people in the early stages, this figure is likely to grow to around 10% of super members within 10 years.
So, the good news is that this change will most likely not impact on most people. However, most of the negative press has centered around the fact that successive Governments continue to tinker with Superannuation, which creates concern for both members trying to navigate the rules and advisers like us trying to help people plan for their retirement.