It’s that time of year again when accountants and economists go into speculation overdrive as budget night approaches. Journalists are busy asking government ministers to rule things in or out and social media is full of 'Act now or lose out!' headlines.
Superannuation is once again at the forefront of the rumour mill and, not surprisingly, worried clients are contacting us asking whether they need to make any rushed decisions before May.
What are clients' concerns?
Putting money in:
- Will the concessional/non-concessional contributions limits be reduced? Will this apply from budget night or 1 July 2016?
- Could there be any changes to the three-year bring forward rule and what if I have already triggered it?
- Will recontribution strategies be banned?
Taking money out:
- Changes to account-based pensions? Will transition to retirement pensions be abolished?
- If I was thinking of starting an income stream should I do it before budget night?
- Should I take my minimum pension prior to budget night?
- Higher rates of tax on concessional contributions for high-income earners.
- A cap on the amount of pension income eligible for tax exemption.
We continue to give our clients the same two pieces of advice every budget season:
1. Continue to act on the basis that the current law will remain the current law.
2. If appropriate and achievable, before budget night, finalise any actions you were planning to do in any case before 30 June 2016.
Should you take any action?
History shows that governments do not usually backdate changes in policy to arrangements already in effect. It is also practically difficult to change contribution limits mid-year.
There are, however, some practical things clients could do before the budget to minimise risk of adverse budget changes.
The following checklist may be useful to run through with concerned clients.
Pre-budget superannuation checklist
Consider actioning pre-budget:
• Planned yearly concessional contributions and non-concessional super contributions
• Triggering three-year bring forward non-concessional contributions threshold
• Making minimum income stream payments
• Execute documentation for new account-based pensions
• Starting a transition to retirement income stream
• Recontribution strategies
Budgets and speculation will come and go, but proactive practical advice will always be appreciated by our clients.
By Joel Curry, director, TriSuper Auditors