With the Federal Budget fast approaching, Elston are urging anyone that may be able to start a Transition to Retirement (TTR) pension to urgently review whether starting one may be beneficial.

In recent months, discussion around the sustainability of Australia’s superannuation system has increased. With the country’s budgetary conditions continuing to worsen, attention has been focused on whether Australia’s superannuation concessions are too generous.

Whilst there has been some speculation in the media, a recent speech given to the SMSF Association National conference by Treasurer Scott Morrison has given some insight into what the government is thinking. Mr Morrison noted that concessions that don’t achieve the aim of reducing reliance on age pension are under review. This will apply to super arrangements that aren’t being used for what they were originally intended.

With the Federal Budget due on May 3, it is an opportune time to ensure you are maximizing your superannuation options.

Transition to Retirement (TTR) pensions

TTR pensions fit this criteria, therefore it is possible that these pensions will be either discontinued or greatly restricted in the budget. We urge anyone who has reached their preservation age and not commenced a TTR pension to review whether this may be an appropriate strategy before budget night.

In order to demonstrate a pension was in force on budget night, fund members would have to sign the appropriate paperwork and receive a pension payment prior to May 3.

Taxation of retirement incomes

A firm commitment to not making any changes retrospective was mentioned. Included in this was a clear indication from the government that they are not looking to make any changes to the rules relating to the taxation of retirement incomes. This is reassuring for those hoping to maintain a tax free retirement income. It also provides further incentive to ensure that where a strategy could be valuable, that it is put into place as soon as possible.

Tax on concessional contributions

There has been concern that the highest income earners are getting the largest tax benefit from this concession. This is a result of there being a 34% differential between the top marginal tax rate and the super tax rate for high income earners, compared with 19.5% for middle wage earners.

It is likely is that the taxation will change so that this differential is more equal for all income earners. For those on high incomes, it may be prudent to look at contribution options and ensure they are maximised, as appropriate, for the current year. For some taxpayers, the double deduction strategy that can be applied for members of an SMSF may also be valuable.

With the impending superannuation changes it is more important than ever that clients are getting regular advice to ensure they maximize the opportunities before they disappear.

If you would like more information please call Elston on 1300 357 866 or email info@elston.com.au