Budget night can deliver nasty surprises on the superannuation front but next Tuesday’s papers should be trouble-free as the bad news on retirement savings is – hopefully – already out in the open.
Changes announced by the federal government in April introduced a tax on super fund earnings for the first time – albeit only for earnings above $100,000 per year, a threshold limiting the 15 per cent levy to those with super fund balances of around $2 million.
The changes also shifted the tax-free threshold for superannuation contributions from $25,000 to $35,000 – a win for fund members, except for the fact that the cutoff was meant to rise to $50,000.
Last year’s budget angered superannuation fund members and the superannuation industry with a surprise increase in the tax on contributions for high-income earners and a move to delay an increase in the threshold at which contributions are taxed.
Workers with less than $500,000 in their super had been due to get an increase in the amount they could put into super tax-free each year, from $25,000 to $50,000.
Under the 2012/13 budget plan, Treasurer Wayne Swan postponed the threshold rise until 2014.
Now the $50,000 levy won’t eventuate, replaced instead by a $35,000 tax-free threshold which will be available to people over 60 from July 1, 2013, and to those over 50 from July 1, 2014.
All fund members will be eligible, whatever their age, by 2018 under current plans.
The changes were announced by Mr Swan after weeks of speculation over possible changes to the super system and federal opposition claims the government was planning a “sneak attack on savings” to fill holes in federal budget facing an estimated $10 billion deficit.
In the end the changes to taxation on earnings above $100,000 will affect about 16,000 people only, while the revised tax-free threshold simplifies a system that would have been difficult to administer.
The Association of Superannuation Funds of Australia (ASFA) has given qualified support to the changes and a spokeswoman said ASFA would be surprised if further changes eventuate on budget night.
Self-Managed Superannuation Fund Professionals’ Association of Australia (SPAA) director Robin Bowerman said he was hopeful that no new changes would be announced in the budget.
Mr Bowerman said the recent changes to superannuation regulations over successive years had damaged confidence in the system to the point where regulatory changes were of greater concern to self-managed fund trustees than market performance.
“Confidence is being eroded by the constant tinkering around the rules,” he said.
“I think until we get through the budget, I think people will be concerned that there will be other things that have not been publicly aired.”
