This year’s Federal Budget included a number of proposed changes to superannuation. The overriding theme of these proposals is the legislative redefining of superannuation as a vehicle “to provide income in retirement to substitute or supplement the Age Pension”. In other words, superannuation is not designed to be an estate planning or wealth creation tool but purely to allow members to accumulate enough savings to fund up to the Age Pension equivalent.

We believe that this is a watered-down version of its previously understood purpose, which was to provide for its members on retirement and for beneficiaries on the member’s death.

Over the past 10 years Australians have witnessed federal governments tinker away at superannuation. Every election cycle has seen more caveats and added complexity to the system.Dying Plant

As a result we have witnessed a certain amount of distrust build up towards superannuation. We are questioned about its longevity, impacts on high-income earners and taxable income.

The constant changes impact heavily on retirement planning. For example, under current law, many members were planning to maximise their contributions as they approached preservation age/retirement at a time when they were best able to afford it. Typically, this is when the mortgage is paid off and the children become self-sufficient. The proposed contributions limits will necessitate a revamp of their retirement plans.

Given the ongoing volatility of government policies on superannuation as well as the further limitations that these recent announcements bring, we are increasingly considering alternative savings vehicles for our clients.

Today as the law stands, superannuation continues to offer tax-effective benefits. We are also working with clients to explore new planning techniques as a result of these recent changes.

Looking ahead, we would not be surprised to see more changes in the coming years, despite the political pledges of stability and certainty. We believe the changes will continue to target high-income earners and will continue to be at the whims of the polls.

For more information, please contact Jason Bayliss or Simon Barry from our Business Advisory division on (07) 3023 1300.