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Is a change of government ahead: proposed superannuation policies

March 2019

If the Labor Party wins the upcoming federal government election, they have announced a number of superannuation policies they intend to implement. These include:

Franking Credits

  • The most talked about policy is the removal of the ability of franking credits to be refunded
  • Under this policy most SMSFs that are completely in retirement phase (i.e. paying no tax) will no longer receive a refund of the franking credits which they are currently entitled to
  • However, where a SMSF has at least one member who has been receiving an Australian Government pension (Age pension, disability support pension, etc) before 28 March 2018, the SMSF will be exempt from this change 

Non-Concessional Contribution Cap:

  • Proposing to reduce the annual Non-Concessional Contribution (NCC) cap from the current cap of $100,000 down to $75,000 per year
  • This will in turn impact the bring-forward cap available, reducing it from $300,000 to $225,000 over 3 years

Reintroduction of the 10% Test for claiming a tax deduction for personal contributions:

  • Since 1 July 2017 all individuals are entitled to claim a tax deduction for any personal contributions made to a complying superannuation fund
  • Labor intend to revert back to the pre-1 July 2017 rules which limit this deduction to individuals who have employment income less than 10% of their total income i.e. are self employed.

Banning New LRBAs

  • Proposing to remove the ability for SMSFs to utilise Limited Recourse Borrowing Arrangements (LRBAs)
  • LRBAs that are already in place will not be affected by this rule
  • It should be noted that obtaining a LRBA within a SMSF is already becoming increasingly difficult with many financial institutions no longer offering this type of lending 

Other Measures Proposed

  • Removing the catch-up concessional contribution concession
  • Reducing the Division 293 (additional 15% tax on concessional contribution) threshold from $250,000 to $200,000
  • Reduction in Capital Gains Tax Discount from 50% to 25% for individuals
  • Fast tracking the increase to Superannuation Guarantee to 12% as soon as practicable (currently set for 1 July 2025)
  • Taxing distributions from discretionary trusts at a minimum of 30% for certain individuals/entities
  • Limit the deductions for tax advice by introducing a cap
  • Limit negative gearing to newly constructed housing from 1 July 2019

The Liberal government have already introduced a number of measures over the past years and currently have a number of proposals, from last years’ budget, being drafted or with parliament to discuss/approve which include:

  • Increasing the number of members for a SMSF from 4 to 6
  • Introduction of a 3-year audit cycle
  • Opt-out of Super Guarantee for employees with multiple employers
  • Changes to Non-Arms Length Income provisions
  • Super Guarantee Amnesty and integrity measures 

Further proposals from the Liberal party are focused on large non SMSF Superannuation Funds and include:

  • Opt-in for insurance cover for members age below 25 who have not contributed to the Fund for 13 months
  • Introduction on a cap on fees charged to low balance accounts and banning exit fees
  • Requirement that one third of directors are independent for industry funds
  • Allow ATO to combine and manage super accounts with balance less than $6,000

Want to find out more about the proposed superannuation policies? Contact our team today!

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Topics: Superannuation

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