Current as of April 2015
SHOULD YOU MAKE YOUR SUPERANNUATION CONTRIBUTIONS BEFORE 12 MAY?
The Federal Budget will be handed down on Tuesday 12 May. There are rumours and leaks in the news on a daily basis. Already this year the government have released the 2015 Intergenerational Report and the Rethink tax discussion paper.
In the longer term, the current discussions in the media hint at things like lower corporate tax rates, possibly coupled with removal of the dividend imputation system, introduction of a “Google tax” aimed at collecting tax on profits diverted by multinationals, changes to negative gearing rules, increased GST rate and removal of some exemptions, and possibly even changes to the current 50% discount on tax on capital gains. These kinds of policy changes would likely require lengthy consultation, so we are not likely to see any immediate action in this year’s budget.
The superannuation system has also been on the rumour mill in recent months, and according to this Sydney Morning Herald article a crackdown in this area is likely to be the next major tax reform. Since reform in this area appears to have popular and bipartisan support, changes could be implemented fairly quickly. Changes that might be considered would include:
- further reducing contribution caps, or even removal of the ability to make non concessional contributions (non tax deductible)
- removing the tax free status of pension income for people over 60
- lowering the income threshold where Div 293 tax is applicable (i.e. the extra 15% tax that is currently payable by those earning more than $300,000)
- reducing the concessional tax treatment of fund earnings, particularly the tax free status of funds that are in pension mode
- removing or further restricting of borrowing by superannuation funds
If any of these were introduced it could happen in one of two ways. An announcement may set down a date that the change is to happen (e.g. from 1 July 2015) and you then have some time to plan to take advantage of the current rules before they change. Alternatively, as has happened on occasions in the past, there is a Budget announcement about the change and it applies from Budget night. For that reason it may be wise to consider making your planned superannuation contributions before 12 May, especially if you were planning large non concessional contributions. If you’re over 55, you should also think about starting any new pensions as soon as possible to make sure you have commenced an income stream prior to the budget.
As always, please contact us to discuss your specific circumstances.
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