With the 2019 election fast approaching, let's dig into how Labor and the Coalition are planning to shape superannuation policy.
Front of mind for some super bodies, of course, is Labor’s proposal to axe cash refunds for excess imputation credits, which Shadow Treasurer Chris Bowen said would “save the budget $11.4 billion over the forward estimates from 2018-19, and improve the budget bottom line by $59 billion over the medium term.” Labor would also introduce a “pensioner guarantee” to ensure those receiving a government pension or allowance would still receive the cash refund.
While the overall impact on the Australian economy is unknown at this stage, some commentators have argued it's tantamount to double taxation on "lower-end retirees" - even if the data doesn't fully back this up - while others have suggested it's a necessary course correction in a country where superannuation investors still have a heavy domestic bias.
Putting these issues aside, though, there are further changes to super policy in each party’s platform:
The LNP’s policy positions as per the 2019 Budget
The Government said it is delaying the start date for ensuring super funds only offer insurance on an opt-in basis - at least for accounts with balances of less than $6000 or new accounts belonging to under-25s - to October 1st.
Furthermore, those aged 65 to 66 will be allowed to make voluntary super contributions without meeting the work test from 1 July 2020. On top of that, they will "also be able to make up to three years of non-concessional contributions under the bring-forward rule." Spouse contributions are now eligible up to age 74.
The tax relief for merging superannuation funds, due to expire in July 2020, will be made permanent.
There also, of course, the First Home Super Saver Scheme, which will allow first home buyers to withdraw their voluntary concessional contributions and non-concessional contributions to fund a first home deposit. Funds withdrawn will be taxed at marginal rates less a 30% offset.
What about Labor?
Labor has come out saying that while the Coalition will increase the Superannuation Guarantee to 10% from July 2021 and then progressively increase it to 12% by 2026, a Shorten Government would do this ahead of the current timetable.
The non-concessional contributions cap, which is the total amount a person can contribute per financial year from their after-tax income, would be reduced from $100,000 to $75,000, and the High Income Superannuation Contribution Threshold to $200,000. Labor said it would do this because “the system of superannuation tax concessions has delivered half of all tax concessions to the top 20 per cent of income earners.”
“Labor will work to ensure Australia has a sustainable and fair retirement income system,” Labor’s policy platform adds.
Labor will also introduce a right to superannuation within the National Employment Standards, whereby employees can recoup unpaid employer super via the Federal Court or the Fair Work Commission. Employers who fail to tell the ATO about unpaid super will face fines of 300% of unpaid super.
Finally, other key policy measures include removing catch-up concessional contributions, ending tax deductibility for personal contributions and banning limited recourse borrowing within SMSFs for real estate investments.
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