With a federal election just weeks away and party campaigning in full swing, what changes to superannuation may be on the horizon?
Coalition Win: Unscathed Superannuation
After all the changes that have occurred to superannuation in the last two years, it’s no surprise that there are very few expected with a Coalition election win.
A series of bills that sat before Parliament were not acted on by the last sitting day – these have now lapsed. Included amongst these are the proposal for three-year audits, increasing the number of SMSF members from four to six and the recent budget announcement about changes to the work test for over 65s. Should they win, these bills would be expected to be reintroduced.
Labor Win: Big Changes
Labor’s proposal is to leave the concessional contributions at a maximum of $25,000 but to reduce the non-concessional contributions from $100,000 to $75,000.
They also intend to reintroduce the 10% rule for those with wages and wanting to make personal contributions and to scrap the catch up of concessional contributions.
Currently, those earning more than $250,000 must pay an additional 15% tax on their concessional contributions, meaning a total of 30% on up to $25,000 pa. Labor intends to reduce the income limit down to $200,000.
Employer Superannuation Contributions (SGC)
Labor has proposed to reduce the lower income limit for employees to receive compulsory super from $450/month to $100/month, and to accelerate the increase of SG from the current 9.5% SG to 12%.
They also wish to include Parental Leave payments in the definition of earnings, to minimise the loss of superannuation for stay at home parents.
Franking Credit Refunds
This is the BIG issue, receiving the most press and proving the most contentious issue should Labor win the election.
Labors intention to remove the refund of excess franking credits to anyone who was not receiving a full or part Age Pension from Centrelink in March 2018 will impact the cash flow of many middle-income Australians.
An individual who wants to take control of their retirement assets through the use of a SMSF will end up paying a very high penalty indeed, whereas the sharing of income and assets through a retail or industry fund will still allow these benefits to be had.
SMSF Limited Recourse Borrowing Arrangements
Labor proposes to accept the Murray Financial System inquiry and ban SMSFs from borrowing – a somewhat out of date proposal given few banks will now lend for these.
In summary - should Labor achieve a win at the next election, buckle up, it’s sure to be a wild ride on the Superannuation Express.
If you have any questions regarding the points discussed in this article, please get in touch with your local RSM office.
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