— Scott Morrison (@ScottMorrisonMP) April 27, 2016
Over the past few weeks we have seen the Government appear to have settled on changes to superannuation contributions, with a likely reduction to the concessional contribution cap and lowering the threshold for Division 293 tax (see blog, changes to superannuation ahead). When comparing these changes in contribution settings by the Coalition Government to that of the opposition, these measures seemed significantly more detrimental. So it was interesting to read today that the Government is having a final re-think with its modelling to:
- potentially retain the concessional contribution cap at $30,000 (not reduce to $20,000); and
- Reduce the Div 293 tax ‘income’ threshold to $250,000 (from $300,000), matching Labor’s previously stated threshold position
This decision appears to have been made to nullify any policy differences that would have given Labor a distinct advantage coming into the Federal election in July. Importantly, the Coalition continues to flatly refuse to target pension earnings, something the Labor Government will look at do by introducing a 15% tax rate on fund earnings attributable to member’s greater than $75,000.
From the twitter video of Scott Morrison (above), closing the ‘loopholes’ is firmly on the agenda. Transition to Retirement Income Streams (TRIS) will almost certainly be a part of this agenda, however whether the Government seeks to remove TRIS entirely as an income stream product or make amendments to the qualification criteria remains to be seen. Whatever the case, I believe getting these pensions in place before budget night will be imperative to avoid being cut out of any likely grandfathering relief.
The other loophole getting airplay is the removal of the anti-detriment tax deduction. I find it interesting that a lot of the commentary around this topics is suggesting it is heavily used within the SMSF sector – it couldn’t be further from the truth… in reality, this is a deduction more heavily used within APRA regulated funds rather than SMSFs given the requirement to have to “fund” the tax saving amount (to augment the death benefit payment) before claiming the tax deduction. In a practical sense, this can be more challenging for an SMSF to complete.
What else can you see as a potential ‘loophole’ the Government may be targeting?
Federal Budget Update
I will be covering all the changes from this year’s Federal Budget in a complimentary webinar next Wednesday at 4pm AEST. Numbers are strictly limited to 100 attendees, so get in early to avoid missing out! You can register by clicking on the link below: