Countdown to the Federal Budget
About the author:
- Author name:
- By Terri Bradford
- Job title:
- Head of Wealth Management
- Date posted:
- 29 April 2016, 2:50 PM
The Federal Budget for 2016 is due to be handed down on Tuesday night (3rd May 2016). We will finally see which superannuation rumours prove true or not. With an election looming, and little time to restore confidence if they get it wrong, it will be interesting to see if the Government does announce major changes to superannuation.
I've listed some areas of concern leading into this Federal Budget, and what changes I think will be announced (if any) on Tuesday night. Note that these thoughts are based on my own views and are not necessarily the views of others:
1. High Income Earners 'Super' Tax
Many in the industry are rightly concerned the Government may reduce the threshold for the high income earners super tax (also known as Div 293 tax) to $180,000 from the current $300,000. I don't believe this will happen. It is more likely they will match the Labour proposal of $250,000.
When you take into account that concessional contributions are added in to determine an individual's assessable income for the tax this would mean anyone on $150,000, if they are under age 50, could be hit with the extra 15% tax. I don't believe that is the Government's intention.
2. Concessional Contributions
Again, I don't think we will see a reduction in current limits. I think point 1 addresses any need for reducing tax concessions.
We might even see some form of concession for individuals who find themselves out of work for a period of time. Previously Scott Morrison has hinted at a super caps 'time out' for those who experience lengthy disruptions in their working life.
3. Transition to Retirement Pension
So much speculation about whether this strategy will stay or go, with many commentators in the industry speculating it will go. Many individuals have already decided to commence a TTR pension just in case.
Once again I am going to be contrarian here as I don't think the TTR strategy will be abolished completely. I think there could be restrictions put in place either from Budget night or in future years, such as a requirement for an actual change in a person's working situation (as was the original intention of the legislation), or the age to access the TTR pension could rise.
4. Non-Concessional Contributions
Will they or won't they reduce or remove access to the ability to make larger non-concessional contributions? Currently one can make large contributions by bringing forward three years worth of contributions in one year. The Government has commented they do not believe superannuation is meant to be a vehicle to store savings for the next generation. This is a tough one to predict. We will find out tomorrow night in any case.
What we do know for sure is that there will be no changes to negative gearing nor tax in the pension phase of superannuation.
If you want to learn more about superannuation or review your current arrangements, contact your Morgans adviser.
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