category: Accounting, Business, Other, Tax
Over the last few months there has been a lot of speculation about possible changes to the tax system that may be in the upcoming budget due to be released by the government on 3 May 2016.
The Prime Minister has confirmed definitively that a number of these possible changes, such as changes to the deductions available through negative gearing and changes to the GST rate, will not be included in the budget.
However, superannuation is one area in which the Prime Minster has not ruled out possible legislative changes, fuelling increased speculation about possible changes.
Although there have been a few minor legislative changes in recent years (particularly with regards to changes to the contributions caps), superannuation tax concessions have largely remained unchanged since the major changes implemented by the Howard government in 2007. For some time the current regime has been considered by many to be excessively advantageous.
There is much speculation from experts as to what changes may be announced, including (but not limited to): –
• Reducing both the concessional and non-concessional contributions caps.
• Changes to the 3-year bring forward rule available with regards to non-concessional contributions
• Removal of the re-contribution strategy.
• Changes to account based pensions, including the possible abolition of transition to retirement provisions
• Changes to the rate of tax for superannuation funds, generally, and more specifically for funds in pension phase.
• Possible higher rates of tax on concessional contributions, particularly for high-income earners, by reducing the adjusted taxable income threshold to which the Division 293 assessments (levying an additional 15% tax on contributions on the individual taxpayer) apply. This threshold is currently $300,000, but reports indicate they are considering lowering it as low as $180,000.
Most budget announcements are not applied retrospectively, although some may be made effective from the date of the budget announcement.
So How Does This Affect You?
We would suggest that if you are planning on making superannuation contributions (either concessional or non-concessional) prior to 30 June, make these contributions prior to budget night (3 May 2016).
Also anyone who is eligible to start an income stream from their superannuation benefits, either under the Transition to Retirement provisions or because they are over preservation age and retired (basically anyone born before 1 July 1960), consider commencing an income stream prior to budget night.
If you require advice with regards to your options, please do not hesitate to contact us.