Preparing your super for the election

It's official: You need to start preparing for an overhaul of superannuation – no matter who wins office on Saturday.

The biggest negative changes to the system – announced by Treasurer Scott Morrison on budget night – now seem almost certain to largely pass into law.

Why? Because Labor has, quietly, announced it will adopt most of the changes, even if it wins government on July 2.

Presumably, this also means they are likely to support most of the changes if introduced by a returned Malcolm Turnbull government.

Labor's new stance negates super as an election – and possibly even parliamentary – issue. As a result, we are now likely to see the $1.6 million pension cap, new taxes on transition to retirement pensions, falling concessional contribution caps and, potentially, a lifetime limit of $500,000 for non-concessional contributions.

But we'll also likely see the removal of the work test that will allow contributions up to age 74, and the catch-up provisions, which will allow workers to put in up to five years' worth of concessional contributions into super.

There is existing bi-partisan support for a super contributions surcharge for those earning more than $250,000, and the low income superannuation contribution (which the Coalition has renamed the low income superannuation tax offset, or LISTO).

In announcing their election costings in recent days, Labor adopted the package of $6 billion of changes to super to the bottom line. It said that it still opposed the retrospectivity of the change to a lifetime limit of $500,000 in non-concessional contributions, but given that it accepted the need for budget savings, it would need to “work out the best way to proceed to raise the same amount of money” as that NCC change would provide.

They haven't ruled out adopting it later anyway.

Even if Labor wins, it will adopt most of the changes, subject to a fairness review of a limited number of those changes. (For a review, see my post-budget column: What I'm telling my clients to do next, May 5, 2016.)

“We will take the outcomes of the review into account when implementing any proposals which turn out to be fair and workable and when considering any alternative measures which yield similar savings,” Opposition Treasurer Chris Bowen said in a joint statement with Jim Chalmers, the Shadow Minister for superannuation.

“It isn't possible or desirable to understand and untangle all of these complex changes without the resources of government, in a rush, and during a federal election campaign,” they said.

Except that if they win government, there is absolutely nothing to untangle. The changes are not law. They don't even need to be ditched.

So, where to now?

Those that were against the changes had two things they could wish for: Firstly, that Turnbull wasn't returned, and secondly, that a Turnbull government couldn't get the changes through both houses of parliament.

And while the bookies have a Coalition victory at $1.10, with the Labor change in heart, that's a bit of a moot point.

You need to start preparing now. And yes, I mean, it's not too late to do at least a few things things tomorrow (June 30).

Working as a team

As I said in this column: Super strategies to use now, May 18, 2016, couples are going to have to work together. Some of the most important strategies are going to revolve around evening up super balances. You will jointly pay more tax, if one of you has more than the $1.6m cap, but the other is well below it.

For those with APRA-regulated funds, you are highly unlikely to be able to organise the first of the two following suggestions by the close of business tomorrow. But the second is possible.

For those with SMSFs, you could consider the following, as it's theoretically possible to do by COB.

Spouse super splitting

You can transfer concessional contributions from one partner to another for the previous financial year. That means, for CCs made up to 30 June 2015, you can transfer the contribution, less the 15 per cent contributions tax, to your partner. But it must be done before the end of the following financial year, meaning COB June 30, 2016.

This is, obviously, reasonably easily done inside a SMSF. And the contribution doesn't not count as CCs for the person receiving it. It is counted as a rollover.

Maximise CCs for this year

If you haven't used up your $30,000 (under 50) or $35,000 concessional contributions for FY16, then consider doing that, as contributions will fall to $25,000 for everyone from July 1, 2017. Be aware, however, that the contributions need to hit the account by June 30 - COB tomorrow. If they don't hit the account until July 1, the will count towards CCs for FY17.

This would be most easily done if you both your business and your SMSF bank accounts are with the same bank. An inter-bank cheque that can be cleared immediately could also work.

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Summary: When Labor released its costings in recent days, it was revealed that the party will keep many of the savings made by the coalition's proposed super changes - meaning they will likely adopt many of the same measures. This will make spouse super splitting all the more important going forward.

Key take-out: If you have an SMSF and act quickly, there is still time to top your concessional contributions to the cap before COB tomorrow. 

Key beneficiaries: General investors. Category: Superannuation.