Australia will go to the polls on July 2 and for the first time since 2007 it appears, fortunately, we will have an election fought out over policies, not personalities
Unfortunately most of the differences focus on the treatment of retirement savings.
The Coalition under Malcolm Turnbull and Labor under Bill Shorten are presenting a number of stark differences when it comes to some key issues for voters with an interest in savings and retirement income.
The battle lines for securing your vote have been clearly drawn with issues like negative gearing, superannuation changes and Self Managed Superannuation Funds (SMSFs) all set for a shake-ups regardless of who wins.
Super contributions
Australian’s retirement savings pool is now massive with about $2,046,000,000 (a little over $2 trillion) spread across various assets and investment vehicles.
It is a very tempting pot of money for politicians looking to balance the budget and both sides have plans to turn your savings into their spending.
As a bit of background, until 2012 all super contributions paid by employers were taxed at 15 per cent, regardless of the employee's tax band. In its second to last budget, the Gillard government imposed an extra contributions tax of a further 15 per cent on high earners taking home more than $300,000.
Now both sides are racing to lower the ceiling. Labor has already promised to cut the level at which higher tax contributions start from $300,000 to $250,000. In this year’s budget delivered last week, the Coalition announced plans to cut it to $180,000.
The Coalition change will draw an extra 244,000 taxpayers into the higher tax net, giving earners on the top 45 per cent rate a discount for contributions of 15 points instead of the present 30 points. In 2013-14 only 380,000 out of 13 million taxpayers earned more than $180,000.
Contributions cap
In other good news for retirement savers, the government is extending the ability for all individuals aged under 75 to make tax concessional contributions to their superannuation.
People aged 65-74 will now be able to make contributions to, and receive contributions from, their spouse.
In a move that will particularly benefit women who take time out from their careers to have children, from July 1, 2017 the Government will allow catch-up concessional super contributions for those people with balances under $500,000 who did not reach their $25,000 concessional contribution cap in earlier years. This will be a five year rolling allowance.
Super transfers
Also in the budget, the Coalition announced plans for a retrospective cap on the transfer of superannuation balances into the retirement phase, set at $1.6 million, limiting the amount of tax free income wealthy retirees can earn.
Existing tax free retirement phase superannuation balances beyond $1.6 million will have to be transferred into accumulation phase accounts and will be subject to a, still concessional, 15 per cent tax rate.
In his budget speech, the Treasurer said the proposed super cap would still allow people to enjoy a very comfortable retirement.
"A balance of $1.6 million can support an income stream in retirement around four times the level of the single age pension," he told parliament.
Negative Gearing
Prime Minister Malcolm Turnbull has pledged no changes to negative gearing or the capital gains tax discount, guaranteeing property values will be a key election battleground.
Labor has pledged to limit negative gearing to new properties and halve the 50 per cent capital gains tax discount.
The Coalition argues Labor’s changes will discourage investment, increase rents and put downward pressure on values. Labor thinks it’s a tax break that drives up the cost of housing, leaving home ownership beyond the means of many average Australians.
Written by Ben Ready at RG Communications.