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 daily. This year, the government released the 2015 Intergenerational Report and the Rethink tax discussion paper, providing valuable information for tax advisors.
In the longer term, the current discussions in the media hint at things like lower corporate tax rates, possibly coupled with the 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 policy changes would require lengthy consultation, so we are not likely to see any immediate action in this year’s budget.
The superannuation system has also been in 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 widespread and bipartisan support, changes could be implemented relatively quickly. Changes that might be considered would include the following:
- 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 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, there is a Budget announcement about the change that applies from Budget Night. Therefore, it may be wise to consider making your planned superannuation contributions before 12 May, especially if you were planning significant non-concessional contributions. If you’re over 55, you should also consider starting any new pensions as soon as possible to ensure you have commenced an income stream before the budget.
As always, please get in touch with us to discuss your specific circumstances.
*Correct as of April 2015
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.