|Summary: The federal government already has promised it will be making no major negative changes to superannuation in its first term, but that isn’t stopping super industry groups from getting in their orders. The list of super requests is growing, although some clearly belong in the realm of the Tooth Fairy.|
|Key take-out: Industry requests range from the reintroduction of the Low Income Superannuation Contribution scheme to making initial and ongoing financial advice from planners tax deductible.|
|Key beneficiaries: SMSF trustees and superannuation accountholders. Category: Superannuation.|
The air surrounding Joe Hockey’s first federal budget as Treasurer is getting pretty thick and acrid.
The budget is still more than two months away, but there’s every indication it will be a “horror” document felt in hip pockets everywhere. Very little seems to be off the table. Slash. Burn. Cancel. Delete. Few government departments will be spared.
But one that will escape a big swinging axe, we have been promised, will please Eureka Report readers – superannuation.
The “no unexpected negative changes in the first term” election promise to superannuation looks likely to be a promise that will be kept. Late last year the government confirmed some early promises. It cancelled the Low Income Superannuation Contribution scheme (LISC) and canned the proposed Labor tax on super pension fund earnings above $100,000 a year.
We’ve been begging for quiet on the superannuation front – as in “no changes” – for years and it looks like we’re set for one this time.
But is the industry satisfied? No. Being satisfied with receiving the “nothing” we have all craved is not in its nature.
The superannuation industry wants more. And, in the last month or so, the multitudes of lobby groups have been sending their wish lists to Canberra.
Some of their requests are quite interesting. But the groups thinking their requests for new spending or tax cuts will be met, in this budget, clearly also believe in the Tooth Fairy.
So, who wants what?
SMSF Professionals Association of Australia
The SMSF Professionals Association of Australia (SPAA) wants the concessional contributions cap lifted. That’s the Tooth Fairy kissing Santa Claus in the Easter Bunny’s pergola. It ain’t gonna happen in this budget.
SPAA is one of many who want the government to reverse its cancellation of LISC (the refund of contributions tax of up to $500 for those earning less than $37,000 a year), which was tied to the Mineral Resources Rent Tax (MRRT).
Financial Services Council
The Financial Services Council says that if the LISC is not reinstated immediately, its reintroduction should be scheduled now to recommence in a few years, such as what has happened with the lift in the Superannuation Guarantee from 9% to 12%, which has been pushed back two years by the Abbott Government.
The chance of it being reinstated immediately would have to be nil. But the Abbott Government, if it can divorce itself from the politics of LISC and the MRRT, could entertain reintroducing it a few years down the track.
SPAA also wants proper costings done on the cost of super concessions to the federal budget. “The Treasury tax estimates method of measuring the value of these concessions is biased ... and misinforms the policy debate.”
“Although the cost of the concessions has not been a prominent issue with this Government, we still believe that it is important that their cost to Government is measured in an accurate and appropriate fashion. This will better inform Government, the public and the superannuation industry when forming future retirement income policy.”
This relates to Treasury’s claims that the annual cost of tax deductions surrounding super is approximately $32 billion a year.
The Actuaries Institute
The Actuaries Institute wants innovation to be encouraged for retirement income products. Specifically, that tax incentives be bought in for lifetime, or deferred lifetime, annuities.
Association of Superannuation Funds of Australia
The Association of Superannuation Funds of Australia (ASFA) has asked the federal government to consider making it more palatable for super funds to invest in infrastructure assets.
“There is no shortage of superannuation and pension funds that are looking to invest in infrastructure. There is only a shortage of projects to invest in,” ASFA’s Pauline Vamos says.
“ASFA supports the ‘recycling of capital model’ whereby governments use proceeds from asset sales to develop those infrastructure assets where infrastructure investors are unwilling to take on risk.”
Financial Planning Association
The Financial Planning Association said in its submission that it wants tax deductibility for initial and ongoing financial advice from planners. While that would come at a cost to the federal coffers, it would bear longer-term fruit for the budget. The deductibility could be means tested.
The FSC has said it would like to see the access age for superannuation lifted from 60 to 62. Currently, those born before June 30, 1960, can access from age 55 and there is a sliding scale to those born on or after July 1, 1964, who must wait until they are 60.
It has been floated in recent years that access to superannuation should potentially be tied to five years behind the government age pension age, which is shifting from 65 to 67.
However, in recent days, Treasurer Joe Hockey has confirmed that pushing out access to the age pension from the current 65 to the scheduled 67, to eventually 70, is something the government is considering.
The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.
- The Australian Securities and Investments Commission has again issued a warning to property spruikers, stating real estate agents and property advisers who recommend SMSFs invest in property may be breaking the law by giving financial product advice. To provide financial product advice, advisers must carry an Australian financial services license or have authorisation under a licence. “We regard any recommendation on using an SMSF for such an investment advice, and those providing it, as unlicensed advice providers,” ASIC commissioner Greg Tanzer said.
- The federal government has ruled out a review on limiting recourse borrowing. “There is a financial [sector] inquiry, which is looking at the architecture of the financial system and as part of that it will also look at the role of the superannuation sector, the savings pool ... of which SMSFs are about a third,” assistant treasurer Arthur Sinodinos told a conference in Brisbane.
- A Westpac self-managed super behavioural report has found that only 1.4% of SMSFs are managed by their trustees with no outside assistance. However, according to the study the potential for mistakes is still huge: more than 60% of those surveyed say they don’t have a financial planner or adviser, while 40% say they’ve never had one.