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2019 Federal Election - where are we now?

It seems few are more surprised than Scott Morrison that the Liberal / National Coalition will be forming Government after the 18 May election.

However, the ALP’s policies which have worried many superannuation savers would appear off the table for now.

The campaign was largely characterised by negativity on both sides.

But what are the key differences between the two majors when it comes to retirement savings?

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LIBERAL/COALITION POLICIES    |    LABOR POLICIES

LIBERAL/COALITION POLICIES

POLICY: Oppose Labor’s policies and guarantee no new taxes on superannuation

WHAT THIS MEANS: The Liberals have promised no new taxes on super and actively oppose Labor’s policies for super changes, ceasing refunds of franking credits (the Liberals have dubbed this the “Retiree Tax”), limiting negative gearing and reducing the capital gains tax discount (the “Housing Tax”). These policies are described in detail under “Labor Policies.”

POLICY: Contribution changes for Older Australians

WHAT THIS MEANS: Announced as part of the April Federal Budget, from 1 July 2020, this measure:

  1. Extends the ability for those aged 65 and 66 to make voluntary super contributions without meeting a work test, and
  2. Allows 65 and 66 year olds to access the bring arrangements for non-concessional contributions (NCCs), and
  3. Increases the age limit for making spouse contributions from age 69 to 74 from 1 July 2020, with those receiving spouses aged 65 and 66 no longer needing to meet a work test.

POLICY: Changes to Exempt Current Pension Income (ECPI)

WHAT THIS MEANS: Also announced as part of the April Federal Budget, from 1 July 2020, this measure:

  1. Removes the requirement to obtain an actuarial certificate in certain circumstances, and
  2. Gives trustees a choice to use the “proportionate method” all year when determining ECPI or stick with the current system of using both methods when applicable.

POLICY: Raising the SMSF member cap from 4 to 6

WHAT THIS MEANS: The Liberals have previously announced a policy of raising the maximum number of members an SMSF can have to 6 from 4. The legislation was before Parliament but it was later removed to expedite other matters the Bill contained through Parliament. Raising the SMSF member cap is still a Liberal party policy.

POLICY: Delaying the start of SuperStream rollovers for SMSFs

WHAT THIS MEANS: Under current law, from 30 November 2019, rollovers to or from SMSFs will need to be made via SuperStream (ie via electronic means rather than paper-based). In the recent Budget the Government proposed to defer the commencement date to 31 March 2021.

LABOR POLICIES

POLICY: Ceasing franking credit refunds.

WHAT THIS MEANS: A Labor Government would stop refunds of excess franking credits from 1 July 2019, with some exemptions for those in receipt of a Government pension or allowance. Although this measure is not exclusive to super funds, it is estimated that around 200,000 SMSFs will be impacted.

The Liberal Government opposes this measure as do Clive Palmers’ United Australia Party.

POLICY: Lower the annual non-concessional contributions cap to $75,000

WHAT THIS MEANS: Labor believes that the non-concessional contributions cap should be lowered to $75,000 (down from $100,000) to be generous enough to allow the level of one-off contributions low- and middle-income earners tend to make from, say, an inheritance or property sale, but not so generous as to allow high income earners gain tax concessions for large annual contributions.

The Liberal Government oppose this measure.

POLICY: Lower the High-Income Superannuation Contribution threshold

WHAT THIS MEANS: Some years ago, the Government introduced a 30% tax on superannuation contributions for those earning $250,000 or more (15% paid by the fund and 15% tax assessed to the individual). Labor propose to lower the income threshold to $200,000 per annum.

POLICY: Cease catch-up concessional contributions

WHAT THIS MEANS: The Liberals have introduced the ability to make “catch-up” contributions which means from 1 July 2018, individuals can “carry-forward” any of their unused concessional contributions cap space.

Those eligible can access their unused concessional contribution cap space on a rolling basis for five years if their Total Superannuation Balance (TSB) was less than $500,000 at 30 June of the previous year. Amounts carried forward that have not been used after five years will expire.

Only unused amounts accrued from 1 July 2018 can be carried forward which means the first year it can be accessed is the 2019/2020 year.

A Labor Government will abolish this measure. The Liberal Government do not propose any change.

POLICY: Bring back the “10% rule”

WHAT THIS MEANS: Until 1 July 2017, individuals had to meet strict rules to be able to claim a tax deduction for their personal super contributions. The requirement, known as the “10% rule”, meant that an individual could not claim a tax deduction on their personal super contributions if 10% or more of their earnings was as an employee. This included assessable income, reportable fringe benefits and total reportable employer super contributions.

The Liberals abolished this rule from 1 July 2017, opening up personal tax deductions on super contributions for anyone who could contribute. Obviously, the benefit of the tax deduction is limited by the concessional contribution cap (currently $25,000 pa).

Labor plans to bring the 10% rule back.

POLICY: Housing Affordability Package

WHAT THIS MEANS: In 2017, Labor released its Housing Affordability Package which included:

  • Banning new Limited Recourse Borrowing Arrangements in SMSFs
  • Limiting future negative gearing concessions to new housing
  • Reducing the capital gains tax discount on assets held longer than 12 months from 50% to 25%. (Existing investments are to be grandfathered).
    • There is no proposal to change the one-third discount that applies to super funds.

Under a Labor Government their negative gearing and capital gains tax discount changes are to apply to assets acquired on/after 1 January 2020.

The Liberals oppose all these policies.

POLICY: Superannuation Guarantee changes

WHAT THIS MEANS:

  1. Currently Super Guarantee (SG) is not payable by employers for employees who earn up to $450 in a calendar month. Labor plan to phase out this threshold progressively by reducing it in increments of up to $100 each financial year between 2020 and 2024.
  2. Currently SG contributions are not required on Paid Parental Leave and Dad and Partner Pay. Labor propose that SG contributions will be required to be paid on amounts received under these schemes.

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