Wealth Intelligence

Mooted changes to superannuation

The government has foreshadowed changes to the superannuation regime. Be prepared. Be  intentional.

The Federal budget is in deficit and it needs to be brought under control. Rightly or wrongly, superannuation is seen as ‘low-hanging fruit’. And the government has made it clear that changes will be made to the superannuation regime that both collect more tax and make it ‘fairer’.

Much of the media commentary is on speculative positions presented by ‘think tanks’, industry experts or those with a ‘barrow’ to push. But it does appear that the government will make changes at next year’s budget and/or go to the election with a package of broader tax and welfare proposals.

Possible rule changes

Implications & possible actions or alternatives 

Abolishing transition to retirement pensions:

The ability to take a pension while working may cease. It is unlikely this change will be retrospective.

It may be appropriate to consider bringing this pension commencement forward, subject to reviewing your personal circumstances.
Introducing a lifetime cap on non-concessional  contributions:

Current limits for each member are $180,000 pa or $540,000 using the 3 year bring-forward provisions.

It may be appropriate to bring forward large non-concessional contributions if funds are available. It may also be appropriate to consider a family trust (or joint accounts) for future investment purposes.
Changing the tax treatment of concessional  contributions:

Most people pay tax of 15% on concessional contributions except for those earning over $300,000 who pay 30%. Discussions so far centre around reducing the tax benefit to higher income earners.

Consider restructuring income to come under the relevant thresholds. This of course may not be possible.
Abolishing anti-detriment payments:

An additional death benefit payment amount to compensate for contributions tax paid throughout a member’s lifetime.

Many self managed superannuation funds are not structured to make these payments, as it requires the payment of a lump sum in excess of the deceased member’s  benefits.
Changes to the tax treatment of pensions:

Tax on earnings is 0% (when taking a pension).

The government has indicated they will not be making changes to this area. Let’s hope they stick to their word.

First Samuel’s review

The First Samuel Strategy Team has reviewed the key superannuation matters publicly discussed and considered the possible implications and actions that may be taken.

Overall, we believe superannuation will continue to have a preferred tax status for your investments over the long-term. Encouraging personal saving for retirement assists the budget by ensuring age pension entitlements do not escalate.

While the Strategy Team are considering these changes, it is important not to react to the speculation in a way that can be detrimental to your long-term financial health. Where it may make sense to implement certain strategies, we will discuss these with you. If your circumstances have changed and you think we may not be aware of those changes please contact us.

As always, if any matters are of concern, or you would like further clarification please contact your Strategist: Nikki, Simon, Jack, Jenny or me.

IMPORTANT NOTICE:  Any advice contained in this document is of a general nature only and has been prepared without taking into account your personal objectives, financial situation or needs.
Because of that, before acting on any advice in this document, you should consider whether the advice is appropriate for you having regard to your personal objectives, financial situation and needs.