We’ve heard very little thus far about specific plans or changes to the superannuation system, but given media commentary and the government’s own statements in the public arena, it is appearing more likely that there may be a move to reduce or limit some of the tax concessions in the current superannuation system.
Our expectation is if changes were made with the effect of reducing tax concessions, superannuation would still continue to be taxed at lower rates compared to alternative investment structures, and clients should therefore continue to consider superannuation in their broader planning decisions.
If changes are made, they could commence at any time. Traditionally, Governments have not sought to apply superannuation changes retrospectively. Taking action earlier may mean that more options are available to you, and it may also mean that existing rules continue to apply to your circumstances.
Below, we outline in more detail some possible changes that government may seek to make, and the corresponding actions you should consider.
The Government may seek to reduce allowable contribution limits, possibly impacting on future contribution plans.
If you are planning or considering future contributions at or around current contribution limits, it may be worth considering if those plans can be bought forward.
Current contribution limits are outlined below.
Concessional Contributions Limit for 2015/2016
|Age on 30 June 2015
|Under age 49
|49 years and over
Non-Concessional Contributions Limit for 2015/2016
|Age at any time in the financial year
|Under age 65
|Age 65 but less than 75
*Individuals aged under 65 at any time in the financial year can ‘bring forward’ contributions of up to three times the standard non-concessional contribution limit across a fixed 3 year period, that is, $540,000 over a three-year period.
**Individual must be gainfully employed for a minimum of 40 hours in any consecutive 30 day period during the financial year
The Government may seek to reduce or limit access to the capital in superannuation funds, possibly by limiting the ability to start drawing on super as a pension.
Under current rules, it is possible to commence drawing on super as a pension upon attaining your preservation age (55 and above, as per the table below). On commencement of a pension, the fund must pay a minimum pension amount each year, and when commencing on the basis of having attained preservation age, a maximum annual pension amount also applies.
If the Government does remove the ability to access super on attaining preservation age, access would be limited to permanent retirement or at age 65. It is possible the Government may also increase the standard access age from age 65 to age 67 to align with age pension rules.
If you were planning on accessing your super on or around your preservation age, it may be worth considering commencing access earlier.
There are eligibility and tax issues that would need to be worked through before making a decision to access. You may trigger a net tax saving or a net tax cost on starting a pension, depending on individual circumstances.
|Date of Birth
|Before 1 July 1960
|1 July 1960 – 30 June 1961
|1 July 1961 – 30 June 1962
|1 July 1962 – 30 June 1963
|1 July 1963 – 30 June 1964
|On or after 1 July 1964
Please ask your regular Pitcher Partners contact or any of the contacts in the Pitcher Partners firms below for options that may be available to you or more information on the issues raised.