Contributions before the Budget
The following is a general email and does not relate to your personal contributions that you have made this year or in previous years.
We have heard a bit of talk about lowering the contributions limits for super. If they lower the tax deductible contributions limit this will automatically flow on to the after tax contributions limits. While we think this is very poor policy and shows a complete lack of understanding on the part of policy makers, it is being talked about. The peak body in Self-Managed Super, the Self-Managed Super Association (formerly SPAA) has already put out something out suggesting that people should be able to average over a number of years so if the limits are not used in one year, it is available in future years. Often these groups try to put something in to reduce the damage when they feel the fight is lost. Self-Managed Super comprises the larger account balances, so they are already under the attack.
While there is no knowledge of a spill (I am not sure the government even knows what it is doing yet) and the government has only released what it will not be doing (and super is noticeably absent from this list), where you can make contributions to super before the Budget we suggest you do so. Forget the oppositions policy for now. They had the same policy of taxing super in pension phase when they controlled both houses of parliament and they never even put it to a vote as the administrative costs were going to outweigh the revenue collected. You don’t have to worry about those sort of details in opposition, but they did lower the amount you do not pay tax on for annual earnings for each member from $100,000 when they were in control to $75,000 in their new proposal. We are unclear why raising the GST was such a no go zone, Malcolm explaining everything to the people seems like he explains nothing. Maybe he found out the overall population were not as bright as he had hoped and in reality could only understand basic slogans and did not have the time or interest to actually think beyond obvious direct affects to 2nd and 3rd round implications. We know the opposition party itself is unable to think past the first step. Get rid of negative gearing!!! Good timing as the housing market would crash, the banks would go under and we would have a depression and our Budget would be worse than before.
However, for deductible contributions the limit is currently $30,000 or $35,000 if you were 49 by 1 July 2015.
The standard after tax contribution is 6 times this amount, which is currently $180,000 and up to $540,000 if you can use the bring forward rule in full.
If the deductible contributions limit dropped to $20,000 the after tax contribution limits would be $120,000 or $360,000 if you can use the bring forward provisions.
So if you are in a position where you have money that you want to get into super we suggest you do it pre Budget, or re-contribution strategies to reduce death tax or to even up accounts as protection against future changes. This assumes you meet all other requirements.
There is also a lot of talk that you will no longer be able to commence an income stream and draw from your super while working. If they did this, I would expect that they would grandfather (leave alone) existing pensions.
We also expect higher tax on deductable contributions for higher income earners.
As there is usually no downside, please feel free to give me a call and we can arrange contributions prior to the Budget where possible.
If you have any queries, please do not hesitate to contact an Intralink adviser at the office.