The Federal Government has previously announced that all tax policy will be reviewed to rein in the budget deficit. Items such as superannuation, taxation of multinationals and changes to negative gearing and even a potential lift in the GST rate were all touted as potential reforms. As the process has unfolded the Government has appeared to back away from many of the proposed reforms.
nWith the public mood and that of the cross benches firmly opposed to any upward or outward changes to the GST, the Government may be forced to compromise to achieve some savings, and this may see changes to the Superannuation regime once again.
nAreas that may be targeted include:
n• Caps or increased taxes on Concessional Contributions (though Non Concessional Contributions may also be targeted);
n• Taxation of Assets supporting pensions when the level of member benefits, or the income derived on these benefits, exceeded a concessional threshold;
n• Taxation of Pensions for those over the age of 60;
n• A Restructure of the Lump Sum Tax regime, which may affect the taxes on Lump Sums for retirees aged 60 and above;
n• Changes to the rules around Limited Recourse Borrowing Arrangements; and,
n• Further changes to the Centrelink and Veterans Affairs assessment of Pensions paid by Superannuation Funds.
nAll of the above changes are likely as they can be said to target mainly the “rich” and those well off enough to be able to afford to go without these concessions. If these changes are to be made they will most likely be announced on budget night with the changes coming into place on that night. All current arrangements should remain untouched.
nAs tax planning is an activity usually carried out in May or early June each year, if these changes are passed on budget night many taxpayers will have already lost access to these concessions rendering many tax planning strategies useless.
nIt may therefore be wise to start the tax planning process now especially where that strategy involves using your SMSF. Planning for some of these changes includes:
n• Making Concessional Contributions and Non Concessional Contributions (including drawdowns and re-contributions);
n• Payment of annual pension entitlements;
n• Planned Lump Sum drawdowns;
n• Realisation of significant capital gains on Superannuation assets;
n• Limited Recourse Borrowing Arrangements for the acquisition of new assets, including assets in unit trusts or companies;
n• Centrelink and Veterans affairs planning where Superannuation pensions are concerned.
nBy taking these steps prior to the May Budget you will reduce the risk that you will lose the benefits of these concessions should touted changes be announced on budget night.
If you have any queries in relation to this, please contact BSM Accountants.