West: Increases in income deductions for pension funds

Minister of Public Administration Allyson West has said the proposed Income Tax Act amendments in the Finance Bill 2021 will seek to increase income deductions to contribute to pension funds.

West was speaking during the Finance Bill (No 2) 2021 debate in the Senate on Wednesday. The bill seeks to amend 13 pieces of legislation.

“We want to encourage people to provide for their own retirement income,” said West. “The deduction they can currently claim for is $50,000 a year. (The government) is seeking to increase that to $60,000 to encourage people to save more.”

She said as the standard of living becomes more expensive and as people become older and have more to spend on, including medical bills, they will need to have a more robust pension plan to support their needs.

“The government seeks to provide deductions against their income to encourage them to save toward their pension earnings.”

West also said the proposed amendments to the act will provide relief to first time homeowners.

“This first-time homeowner’s allowance was introduced in 2003 to encourage those who have been impacted by housing prices to put them in a better position to afford their first homes.”

She said currently they can claim a deduction of $25,000 in every year for the first five years from 2022 once the bill is passed, but the bill seeks to increase that to $30,000.

West also addressed proposed amendments to the Petroleum Taxes Act, which seeks to encourage companies to engage in carbon capture and storage initiatives to reduce carbon emissions.

The bill says companies that incur expenditure from investing in carbon capture and storage or enhanced oil recovery will be entitled to a deduction based on their chargeable profits for that year of income. Deductions will be in the form of an allowance equal to 30 per cent of the actual expenditure incurred, up to a maximum of $500,000.

“As the world targets net-zero carbon emissions by 2050…it is recognised that investors in countries that are heavily industrialised are not able to eliminate carbon emissions from production processes and the solution is to capture, store, and reuse carbon dioxide.

“(The act) not only allows us to fulfil our obligation to the world but allows us to get involved in cleaner industries…There are lots of positive opportunities for pursuing this goal.”