Accountants and financial advisers should prepare for further upheaval in the superannuation regulatory landscape in light of the upcoming federal election and the possibility of a change in government, according to an SMSF expert.
Smarter SMSF co-founder and chief executive Aaron Dunn told a recent webinar accountants and advisers should consider how potential policy changes to super by a Labor government could impact on their clients and plan accordingly.
Specifically, Dunn said Labor has clearly stated it expects to lower the annual non-concessional cap from $100,000 to around $75,000, which would lower it from four times the concessional cap to three times the cap.
He noted this would have a flow-on effect on the bring-forward rule, which would also reduce it down to $225,000.
Furthermore, he pointed out Labor has proposed to further reduce the high-income super contributions threshold from $250,000 to $200,000.
In addition, the ability to carry forward unused concessional contribution cap amounts is going to be scrapped if there is a change in government, he said.
“We’re only just about to start to see the benefits of this unused catch-up contribution legislation,” he said.
“But Labor have made very clear that they don’t see the benefit of having that piece of legislation in place so they would look to repeal the use of that, which may in essence disappear before we even have the ability to start to use that legislation.”
Under the carry-forward rules members were entitled to begin using the benefits of from 1 July 2018, they would not have accumulated a year’s worth of unused contributions until the subsequent financial year.
“So again it’s going to be subject to timing whether we ultimately see a benefit or not of that,” Dunn said.
He expressed frustration at the prospect of Labor disallowing the tax deductibility for personal contributions, where the government last year scrapped the 10 per cent rule so anyone who was eligible to contribute to super could claim a tax deduction for personal super contributions within the overall concessional cap of $25,000.
“So in essence [Labor will be] reinstating the 10 per cent rule, ensuring that contributions can be claimed only for those that would be substantially self-employed,” he said.
“I think many of you, as you work through the tax planning for each year, would clearly now take advantage and now look at the opportunities within your client base around just simply optimising a $25,000 concessional contribution cap.
“It doesn’t matter the form as to how those contributions come about and that I think again is a real frustration if we saw that repealed and go back to, in essence, where it initially resided.”