Three proposed changes to super

On Thursday, the Treasurer Mr Scott Morrison announced three proposed changes to super.

The three changes to those changes announced in this year’s Budget are:-

  1. A new non-concessional contribution (non-deductible) limit system.
  2. Deferment of the concessional catch-up system.
  3. Abandonment of the proposal for those aged between 65 and 74 to be able make concessional and non-concessional contributions without having to first satisfy a work test.

Yet not all is as bad as what the press may have you believe. Yes, some of the changes are unpalatable.  Yes, future generations will not be able to accumulate significant sums in super as previous generations have.  But that all said, there are still some sensible and attractive reform announcements from this year’s Budget.  If you want to read more about those tax changes, email accountants@mrsaccountants.com.au and we will forward you a copy of our 2016 Budget briefing paper and addendum thereto.

With all this negativity and uncertainty about super, it is important to remember two things:-

  1. Super is before all else a low tax environment with current tax rates being 15% on contributions, 15% on earnings within accumulation mode (10% for capital gains) and 0% on the earnings on the balance in pension mode. These tax rates are less than those for many working Australians, often significantly so.
  2. It is arguably the best asset protection vehicle.

So don’t be misled by all the negativity and political debate. It would though just be nice to return to the position we had from 1983 until 2006 when we had a prolonged period of sustained stability and promotion of super (as both Keating and then Costello understood the benefit to the government purse on encouraging people to look after themselves rather than relying on the age pension at a time of rapidly ageing population).

 

At MRS, we will spend today planning for your success tomorrow.

At MRS, we will spend today planning for your success.