With an election looming and an improving fiscal position, SuperConcepts is predicting a few election sweeteners for the superannuation industry in this year’s Federal Budget.
At the top of the list, according to Mark Ellem, SuperConcepts’ Executive Manager of SMSF Technical Services, may be the restoration of certain caps and threshold that had previously been reduced to help stabilise the Government fiscal position.
“The contribution caps for example may be one area that is looked at by Government, and while we don’t expect to see an increase in contribution caps across the board, it’s possible we may see some targeted increases in the contribution caps for some taxpayers”, Mr Ellem said.
“For example, we may see a restoration of the $35,000 or possibly $50,000 concessional contributions cap for members over 50.
“Prior to the 2017/18 income year, these higher caps were hugely popular as they gave individuals, who were approaching retirement, the flexibility of making larger concessional contributions at a time when they have the financial capacity to do so”, Mr Ellem said.
While the new concessional contribution catch-up rules do provide some flexibility to do this, the problem with the new catch-up rules is that they are restricted to members with balances under $500,000.
Another area, arguably at the other end of the age and income spectrum, which may be looked at is the restoration of the Government co-contribution payment rate to 100 percent with a maximum Government co-contribution of $1,000. Since 2012/13, for eligible members, personal contributions have been matched by the Government at the rate of 50 percent up to a maximum Government contribution of $500.
“To assist low and middle-income earners, the Government may decide to restore the pre-2012/13 approach and match eligible personal contributions dollar for dollar up to a maximum co-contribution of $1,000”, Mr Ellem said.
Aside from these changes, SuperConcepts believes the Government may also decide to remove the age and work test rules which were a feature of its original Super Reforms Package in 2016.
This measure was removed from the super reform package to secure the passage of the rest of the reforms through parliament in 2016.
“Given the general popularity of this measure, and benefits of reduced complexity and red tape, we think it will be very tempting for the Government to reinstate this aspect of their super policy in this year’s Federal Budget,” Mr Ellem said.