(03) 9020 2905SUMMARY: Superannuation Budget submission time – a time for wish lists and the tooth fairy.
The air surrounding Joe Hockey’s first Budget as Treasurer is getting pretty thick and acrid.
It’s still two months’ away. But there’s every indication that it will be a true “horror” document felt in hip pockets everywhere. Very little seems off the table. Slash. Burn. Cancel. Delete. Few departments will be spared.
One that will escape a big swinging axe, we have been promised, will please Eureka Report readers – superannuation.
The “no unexpected negative changes in the first term” election promise to superannuation looks likely to be a promise kept. Late last year, the government confirmed some early promises. They cancelled the Low Income Superannuation Contribution and canned the proposed tax on super pension funds that earn more than $100,000 a year.
We’ve been begging for quiet on the superannuation front – as in “no changes” – for years and it looks like we’re set for one this time.
But, is the industry satisfied? No. Being satisfied with receiving the “nothing” we have all craved is not in its nature.
They want more. And in the last month or so, the multitudes of lobby groups have been sending their wishlists to Canberra.
Some of it is quite interesting. But the ones thinking requests will be met, in this Budget, for new spending, or tax cuts, clearly also believe in the tooth fairy.
So, who wants what?
The SMSF Professionals Association of Australia (SPAA) wants the concessional contributions cap lifted. That’s the Tooth Fairy kissing Santa Claus in the Easter Bunny’s pergola. Ain’t gonna happen this Budget.
SPAA is one of many who want the government to reverse its cancellation of LISC (the refund of contributions tax of up to $500 for those earning less than $37,000 a year), which was tied to the Mineral Resources Rent Tax.
The Financial Services Council says that if it is not reinstated immediately, it’s reintroduction should be scheduled now to recommence in a few years, such as what has happened with the lift in the Superannuation Guarantee from 9% to 12%, which has been pushed back two years by the Abbott Government.
The chance of it being reinstated immediately would have to be nil. But the Abbott Government, if it can divorce itself from the politics of LISC and the MRRT, could entertain reintroducing it a few years down the track.
SPAA also wants proper costings done on the cost of super concessions to the Federal Budget. “The Treasury tax estimates method of measuring the value of these concessions is biased … and misinforms the policy debate.”
“Although the cost of the concessions has not been a prominent issue with this Government, we still believe that it is important that their cost to Government is measured in an accurate and appropriate fashion. This will better inform Government, the public and the superannuation industry when forming future retirement income policy.”
This relates to Treasury’s claims that the annual cost of tax deductions surrounding super is approximately $32 billion a year.
The Actuaries Institute wants to innovation encouraged for retirement income products. Specifically, that tax incentives be bought in for lifetime, or deferred lifetime, annuities.
The Association of Superannuation Funds of Australia (ASFA) has asked the Federal Government to consider making it more palatable for super funds to invest in infrastructure assets.
“There is no shortage of superannuation and pension funds that are looking to invest in infrastructure. There is only a shortage of projects to invest in,” ASFA’s Pauline Vamos says.
“ASFA supports the ‘recycling of capital model’ whereby governments use proceeds from asset sales to develop those infrastructure assets where infrastructure investors are unwilling to take on risk.”
The Financial Planning Association said in its submission that it wants tax deductibility for initial and ongoing financial advice from planners. While that would come at a cost to the Federal Government, it would bear longer-term fruit for the budet. The deductibility could be means tested.
The FSC has said it would like to see the access age for superannuation lifted from 60 to 62. Currently, those born before 30 June 1960 can access from age 55 and there is a sliding scale to those born on or after 1 July 1964, who must wait until they are 60.
It has been floated in recent years that access to superannuation should potentially be tied to five years behind the government age pension age, which is shifting from 65 to 67 (but see below for government utterings on lifting that to 70).
In recent days, Treasurer Joe Hockey has confirmed that pushing out access to the government age pension from the current 65 to the scheduled 67 to eventually 70 is something the government is considering.
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The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.
Bruce Brammall is director of Castellan Financial Consulting and the author of Debt Man Walking. E: bruce@castellanfinancial.com.au