As we near the federal budget for 2016, it seems more and more likely that Superannuation Tax Concessions will be overhauled, or at least stripped back, in order to make good the Government’s promise to reform the tax system and improve the budget bottom line.
It seems that a GST hike is all but off the table, at least for now, leaving Superannuation as a likely target. Nobody can yet predict exactly how the Government will look to reform Superannuation concessions, however some mooted possibilities are:
– Reduce the tax free income concessions on large pension accounts, or tax all superannuation earnings, whether in pension or not.
– Place a lifetime cap on concessional super contributions.
– Change tax on superannuation earnings, to a tax offset, possibly 15% or 25%, against the member’s marginal tax rate.
– Any number of other simplifications or complications to the existing rules.
While there is likely going to be some change, only days ago Treasury has downgraded their estimates on the overall revenue cost of the current superannuation concessions. This is the essential question that must be answered before blindly raiding superannuation. How many more people will rely on the age pension, if they are dis-incentivised to save for their own retirement? While this in itself improves the budget outlook, it waters down any expected gains from changes to the existing rules. Whether we will see a complete overhaul or a tinkering around the edges is anyone’s guess.
Confused? This is understandable given the already convoluted nature of superannuation law. If you are thinking about superannuation and how it can work for you, now is the time to speak to your accountant. Often changes to existing tax law are ‘grandfathered’ to the date of any budget announcement, so there may only be a few months to ‘lock in’ to the current system.
Contact Mayberry Meldrum & Anderson, your Murwillumbah Accountants with a firm understanding of superannuation, and an ear to the ground for any likely changes to come.