The Government last week announced a package of superannuation reforms which will help reduce uncertainty in the industry stemming from weeks of rumours and ‘leaks’.
The proposed changes will:
- Cap the tax exemption for earnings on superannuation assets supporting income streams at $100,000, with a concessional tax rate of 15 per cent applying thereafter, and apply the same treatment to defined benefit funds
- Simplify the design and administration of the higher concessional contributions cap
- Reform the treatment of concessional contributions in excess of the annual cap
- Extend the normal social security deeming rules to superannuation account-based income streams
- Extend concessional tax treatment to deferred lifetime annuities, and
- Further reform the arrangements for lost superannuation.
The Government has also announced that it will establish a Council of Superannuation Custodians to ensure that any future changes are consistent with an agreed Charter of Superannuation Adequacy and Sustainability.
What does this mean?
First, keep in mind that these changes will not be introduced until after the next election as such they may never happen so no need to panic just yet. Let’s take a look at each issue:
The clear message I took from this announcement is that shares now look like the best option when investing in super as they give you more flexibility around franking credits, timing of capital gains and control over the income your portfolio makes.