Changes in Superannuation System Could be Chaotic
Wayne Swan’s strategy to leak the painful and short sighted aspects of his sacred budget has revealed some worrying policies.
SMSF’s Members Association Chairman Grant Abbott observes that this change can make rates go up and down at any time. For instance, it may be set among contributors with $300,000 annual income this year but it may very well drop down to $180,000 next year which is where the highest marginal tax rate kicks in.
There are also talks that Finance Minister Penny Wong and Treasurer Wayne Swan are pushing for the rate to start at $200,000 because the government is eyeing the retirement funds to help with the budget. Using the superannuation contributions system has long been one of the most effective tax strategies for the rich, which can effectively cut their tax rate by more than 30%.
The parliament will sit down come May 8 for Swans much anticipated budget, where no one is expected to escape the pinch. Industry observers noted that there might be a few surprises left come budget time. Andrew Moir, private wealth head of Evans & Partners, said that given the rumors circulating, it won’t be a surprise if something comes up during the deliberation.
The question now is if a new adjustment in the system can help the government deliver the $1 billion it needs and if super’s tax environment will remain simple and safe for investors. The introduction of the much derided super contributions tax surcharge was regretted by former treasurer Peter Costello because of it’s difficulty to implement. It appears that Wayne Swan’s alignment of superannuation contribution benefit with taxable income will create a whole new headache for the Australian Taxation Office.