2016 Budget - a SUPER budget?
The 2016 budget was interesting to watch. The public were prepared for there to be cracking down on the rich who were using superannuation as a tax dodge and an estate planning mechanism. The rhetoric started in earnest when it was deemed necessary to enshrine the definition of super into legislation – to provide income in retirement to substitute or supplement the age pension.
Treasurer Scott Morrisson did an excellent job of presenting the budget. Yes there are changes to super - among them:
- $1.6m max pension balance
- People earning over $250k to pay extra 15% on super contributions
- Lifetime $500k non concessional cap
- Reduction in Concessional contribution caps to $25k
- People aged 65 – 74 no longer need to meet work test to make non concessional contributions
- Any person under 75 can now make a tax deductible contribution even if they are an employee
- About half the anticipated funds raised from superannuation changes are to be redirected to lower income super breaks
This to me seemed a reasonable outcome both politically and economically. Harsh but fair if you will. However consider this:
- The $1.6m pension cap is RETROSPECTIVE. People have organised their affairs according to the laws of the land at that time. The majority of these funds were not inheritances but small business people who bore the risk of enterprise in order to create their wealth
- In 2007 the LIBERAL Treasurer Peter Costello encouraged super contributions with a one off $1 Million non concessional contribution opportunity. In addition to generous caps people utilised the $1million dollar lifetime cap for sale of business assets, contributed to super from settlement for injuries resulting in permanent disablement and collected on insurance policies within super to support their families.
- When Tony Abbott was in power he stated that their would be no major changes to superannuation – it was out of bounds comments he publicly made many times.
- Liberal philosophy on super changes with change of leaders
- Malcolm Turnball needs to be seen to be different from from Abbott or his take over was on false pretences
- There was no consultation with the superannuation industry prior to budget announcement
- Even the labour party will not vote for the $1.6m cap on the basis that retrospectivity threatens the integrity of the entire tax system.
All that was needed to be done was to provide a sense of stability. Both self funded retirees and anyone interested in their long term financial security crave this. All that needed to be done was to draw a line in the sand at budget night and apply the rules (which I do in fact agree with from an equity perspective) from that date forward.
Other than the kick in the teeth that the perception of superannuation has copped from this politically motivated budget there are MANY OPPORTUNITIES that have arisen for both the “rorting rich” and the average “hard working Australian”.
I am looking forward working with you all to maximise these opportunities that are presenting themselves.