Labor win tipped to have ramifications for transfer balance cap
If elected, Labor may decide to lower the general transfer balance cap amount to align with its proposed $75,000 earnings threshold, an industry consultant has predicted.
Back in April 2014, Labor announced that it planned to tax superannuation earnings above $75,000 a year at 15 per cent.
At the time, Labor said that the measure would affect approximately 60,000 superannuation account holders with superannuation balances in excess of $1.5 million.
In a more recent policy document released this year, Labor confirmed that it will still be proceeding with its plans to reduce the tax concessions for Australians with superannuation balances in excess of $1.5 million.
Speaking in a recent webinar, Smarter SMSF chief executive Aaron Dunn said that when Labor originally talked about its plans for a $75,000 earnings threshold, it said that based on a 5 per cent earnings rate, this would amount to a balance of around $1.5 million.
“If the Labor government has legislative control, would they then look to make an adjustment to the balance or the amount at which the general transfer balance cap actually operates?” Mr Dunn asked.
“Would we see a reduction from $1.6 million to $1.5 million, maybe potentially even lower? When we [look] at how many other things are linked to the general transfer balance cap, we could see a flow-on effect that occurs there as well.”
Mr Dunn said that it is possible that the Labor Party could use the general transfer balance cap as a lever to implement what their superannuation reforms were.
Given that the total superannuation balance threshold is linked to the general transfer balance cap, Mr Dunn explained that if Labor was to change the general transfer balance cap amount, this could also have flow-on effects for a range of other measures.
“When we think about the total superannuation balance, it has such a profound impact across a range of measures. At $1.6 million, [members] are limited in their ability to do things such as make non-concessional contributions, [for example],” he explained.
Mr Dunn noted that Labor has said it will not be applying changes retrospectively.
“So, if you’ve used 100 per cent of your cap, then I would assume therefore that you can carry on under that guise, but again that’s something I could potentially see being impacted if the Labor government gets into power and we have a second federal budget for the year,” he said.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
