The Budget's impact on Super

The Federal Government, regardless of who is in power, can’t resist twitching or making changes to super every time they have a major financial policy announcement or hand down a budget. But hey, if you live long enough you will see everything!

Last week’s Federal budget was very much a non-event with no real change in policy direction or new initiatives not even in the over regulated arena of superannuation. I guess it was the budget you have, when you think you will be in an election soon.

Importantly, there was no talk of the suggestion that the Government would put in place a new tax of 15 per cent on unrealised gains held within superannuation for amounts over $3 million.

While this would impact on a relatively small number of people, it was never likely to gain sufficient support to be passed into law and I think these sort of piecemeal changes just undermine everyone’s confidence in super.

So, I think this change is undesirable for this reason alone.

Importantly, all the key contribution caps or limits to how much you can put into super remain unchanged although its disappointing that they have not been indexed to increase in line with inflation.

The only change that I have been able to spot is the amount you can have sitting in a tax-free environment, supporting an account-based pension, has increased from $1.9 million to $2 million.

Beyond that I can’t see any changes.

I think it’s an opportunity lost, although there is every likelihood that the incoming Federal Government will hand down another budget or budget update or economic statement sometime later this year.

While there was a meagre tax cut which did little more than reduce the impact of bracket creep, there was nothing relating to the overwhelming need in this country for tax reform and reducing the burden placed on PAYG taxpayers to support the Federal Government.

There was nothing to help small businesses, which at the moment are closing in record numbers, including the failure to extend the much praised $20,000 instant asset write off for small businesses.

There was nothing to reduce the impact of ballooning energy costs, as we slowly transition to more sustainable energy sources, that are bringing long suffering Australian manufacturers to their knees.

So, while the economy struggles to stay out of recession, there was nothing in this budget to give hope that some of the major structural issues facing Australia have been addressed or that there will be much change in the year ahead.

Overall, a very disappointing event.