2009 Federal Budget: Rumours and Superannuation Strategies
There are always rumours about the contents of the Federal Budget (this year’s being delivered on 12 May), especially concerning superannuation. This year is no different, and the rumours include:
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Changes to the taxation treatment of concessional (deductible) superannuation contributions in a fund
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Changes to the taxation relief for making concessional contributions
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Cessation of the 2-year bring forward rule for non-concessional superannuation contributions
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Introduction of taxation events on the conversion of fund assets from supporting growth or accumulation entitlements to supporting pension liabilities (perhaps similar to those announced in the 2003 Federal Budget, but subsequently withdrawn)
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Introduction of some form of limit on benefits paid from superannuation funds, or limitation on the current tax concessions on those benefit
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Increase in the taxation rate imposed on superannuation fund income
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Elimination of the entitlement to a refund of excess imputation credits
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Removal of the Transition to Retirement Income Stream or limiting its availability
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Removal of tax deductions for insurance premiums paid for life and disability cover by a superannuation fund
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Restrictions on the use or establishment of self-managed superannuation funds (perhaps based on asset levels).
Whether any of the rumours have credibility will only be seen on Budget night.
However, it may be prudent for you to consider whether you should implement any actions prior to the Budget, particularly where you were contemplating implementing those actions before 30 June or within the near future.
Detailed below are some of the possible actions that you could consider or discuss with our advisor, prior to the Budget. In considering your strategy, you should be mindful that, if the Budget results in unexpected changes, any action taken by you may not have the intended effect.
Concessional Contributions
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Making your personal and/or employer concessional contributions to a fund before 12 May rather than waiting until 30 June
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If you were contemplating contributions by way of an
in specie
transfer of assets, remember that registration of these transfers may take some time. Where possible, consider whether contributions should be made in cash rather than by transfer of assets, if the fund could accept the
in specie
transfer of the asset, the fund would also be able to acquire that asset for cash.
Non Concessional Contributions
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Making your personal non-concessional contributions to a fund before 12 May rather than waiting until 30 June
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Again, if you were contemplating contributions by way of an
in specie
transfer of assets, remember that registration of these transfers may take some time. Where possible, consider whether contributions should be made in cash rather than by transfer of assets. If the fund could accept the
in specie
transfer of the asset, the fund would also be able to acquire that asset for cash.
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Consider whether you can and should utilise the 2-year bring forward provisions (if not already triggered), but being mindful that if you are turning 65 in the 2010 or 2011 year, the triggering of the bring forward could actually reduce the level of non-concessional contributions you could have made if there are no adverse changes in the Budget.
Converting from Growth/Accumulation to Pension Phase
Consider whether benefits could be converted to pension phase prior to 12 May in case there are adverse announcements on the conversion process (such as a notional CGT calculation or reintroduction of an RBL-type system), being mindful that:
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Certain conditions of release (relating to age and work status) may need to be met before a pension can commence
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Pensions may be able to be converted back to growth/accumulation mode after the Budget
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Minimum pensions would need to be paid for the period from commencement of the pension to 30 June or earlier commutation
This should be considered carefully where you are eligible to commence transition to retirement income streams prior to 12 May.
Benefit Payments
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Where minimum pension payment requirements need to be met by 30 June, consider whether all pension payments that were going to be drawn from the fund should be made before 12 May rather than waiting until 30 June. You should note that minimum account based pension payment requirements have been reduced for this year by 50%.
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Where lump sum payment were going to be withdrawn from the fund before year end, consider whether you might arrange for these payments to be made before 12 May.
Income Receipts
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Where you have control of the timing of distributions from private trusts or private companies to a fund, you might consider whether a distribution can or should be made to the fund prior to 12 May, especially where there are imputation credits.
Insurance Premium
Establishing a SMSF
The information in this alert is provided as general information only and does not consider your specific objectives, situation or needs. You should not rely on the information in this alert. We accept no duty of care or liability to you or anyone else regarding this alert and we are not responsible to you or anyone else for any loss suffered in connection with the use of this alert or any of its content.
Please call your Macquarie Partners contact if you wish to discuss any of the above matters.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
