Recent political and Treasury discussion about possible changes to superannuation should not put doubts into people’s minds about its attractiveness, particularly the benefits of SMSFs, says Michael Hutton, head of wealth management at HLB Mann Judd Sydney.
“Superannuation is still an excellent tax-advantaged vehicle for retirement savings and the types of changes that were recently discussed do not change this for the vast majority of people.
“The discussion about superannuation changes is likely encourage more people to consider SMSFs because of the flexibility they offer and the ability they give to members and trustees to react quickly to any changes that may be introduced,” he said.
Mr Hutton said that although many of the possible changes being discussed in recent weeks have now been rejected by both sides of politics, this is not to say they will never arise again.
“However a couple of useful indicators did come out of the discussion.
“One is that both major parties appear to recognise the growing electoral clout of retirees and would be concerned about bringing in changes across the board that affect retirees too much.
“Another is that while many of the changes discussed were big ticket items in terms of revenue collected, the impact on most super fund members was relatively small – it is the total impact of revenue collection that the Treasury is after and small amounts multiplied by the total number of super fund members soon add up.
“In addition, even if there is a change in government, any amendments the new government might introduce are still a couple of years away, and Tony Abbott is on record that any superannuation changes should be grandfathered.
“This means making the maximum contribution now – and taking other steps such as setting up a SMSF sooner rather than later – seem sensible.
“The present government has also made it clear that their approach is aimed at the very wealthy and is not going to affect the vast majority of fund members.
“Furthermore, both sides of government and the Treasury are very aware that the incentives in the current superannuation system help reduce reliance on social security, saving them a major cost.
“The recent debate has also made it clear that to change the current superannuation system radically would dent confidence in the system and impact retirement plans of both aspirational and current self-funded retirees.
“These are people who are important to the economy as they have little or no reliance on social security, and provide investment capital to help keep the economy strong.
“Any government would be wise not to upset this group too much as it is a major voting group that is only just starting to recover from the Global Financial Crisis.
“So all in all, it is difficult to see any Government making substantial changes to the superannuation tax system although we can expect to see changes around edges, such as removing the little-used spouse rebate, and applying the already announced surcharge tax on contributions for high income earners which only affects a minority of people.
“At some time we can also expect more of a push towards people being encouraged to take pensions rather than lump sums from their super and we would support this as we generally recommend this approach to clients anyway,” Mr Hutton said.
HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and part of the HLB Mann Judd Australasian Association.
For more information please contact:
Michael Hutton – Phone: 02 9020 4193
11 February 2013