Heffron SMSF Solutions head of customer Meg Heffron said she fully expects to see reductions in the non-concessional contributions cap and greater restrictions placed around the bring forward rules in the future.
“Those who are making large contributions this year might choose to do so before budget night,” Ms Heffron said.
SMSF practitioners and their clients should remember that it’s entirely legal to borrow money to make a personal super contribution, but the interest is not tax deductible and security from personal assets would be required, she said.
“Long-term borrowing in this way is unlikely to be tax effective but it would allow a contribution to be made quickly if the personal cash is not yet available,” Ms Heffron said.
Those who were planning to make large contributions next year, she said, are in a harder place – bringing those forward will generally compromise longer term plans.
“My instinct is to leave those plans in place and accept the risk that the bring forward rules may change on budget night,” said Ms Heffron.
Clients who want to withdraw large amounts of taxable money and make non-concessional contributions should also act before budget night on 3 May.
Transition to retirement pensions are also likely to be reined in, particularly for those who start pensions without any change to their working arrangements, Ms Heffron cautioned.
The original purpose of transition to retirement pensions was to ease the transition from full- time work to retirement by allowing superannuation pensions to start before full retirement, in order to fill the income gap created when someone winds back to part-time.
“However, they were legislated by simply allowing anyone over their “preservation age” to start one, regardless of whether or not anything had actually changed in their work life,” Ms Heffron said.
“The outcome was an excellent tax planning strategy – many people over 55, the preservation age until it increased to 56 this year, made no changes to their work arrangements, started a pension and used the extra income to increase their salary sacrifice superannuation contributions.”
Consequently, Ms Heffron expects transition to retirement pensions to be pushed out to a later age or linked to personal circumstances.
“The gradual increase in preservation age has already started to push out the earliest starting date for many looking to start a transition to retirement pension.
“This budget is a possible time where the eligibility rules might be reined in. It would be politically easier than many other changes to super. It is the kind of change that could be introduced with effect from budget night without major complexity in the law.”
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