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We can relax for now! Treasurer Joe Hockey has made it clear that there will be “no new taxes on superannuation”.
Change could still be ahead though as they are still to issue a response to the Murray Financial System Inquiry and the Tax White Paper later in the year.
So from a superannuation perspective, what do you need to know about last night’s budget announcements?
1. Changes to borrowing rules.
There were no changes to the borrowing rules for super released in the budget. However, this has not closed the door on the ban proposed under the Murray review. Changes are still expected to be announced by mid-year at the latest. Check out our recent blog post here
[Our recommendation is still to finalise any planned borrowing arrangement as soon as possible so that you will be subject to the existing rules before any changes are made].
2. The terminal illness access to super will be extended to 24 months from the existing 12 months.
Currently to qualify for tax free withdrawal of your super under this rule you were required to be diagnosed with a terminal illness by two doctors with less than 12 months to live. This has now been extended to those with less than 24 months to live. This will relieve some of the financial burden for those suffering from terminal illness.
[If you or a loved one is eligible for access to super due to terminal illness it is worth obtaining strategic advice on your entitlements, even if you do not require the income].
3. There will not be a tax on pension withdrawals over $75,000.
The budget does not include any suggestion of a limit on tax free withdrawals from super for retirees over 60. This is a welcome relief for self-funded retirees.
[Take this opportunity to maximise your tax free component in super before 30 June 2015].
4. Franking credits will still be refundable to super funds.
The government has acknowledged that the refund of franking credits in the superannuation environment is a crucial part of income planning for superannuation fund’s in pension phase. Changes to how the franking system works would impact how retirees invest their superannuation and therefore would have a wider economic impact if the refunds were removed.
[This is great news for retirees that are using the franking credits refund to boost their super fund income to fund pension payments].
5. The penalties for SMSF non-compliances will increase from 31 July 2015.
This will take the maximum fine that can be levied on a director or trustee for a breach to $10,800. These rules now apply to breaches such as early access to your superannuation without meeting a condition of release and loans to members.
[The new penalty regime commenced on 1 July 2014 where breaches of superannuation rules occur].
6. 10% cap on deductible amount for defined benefits as of 1 January 2016.
This is to limit the amount of defined benefit income which is not counted in the income test for age pension purposes.
[If you are of age pension age and are eligible for a defined benefit pension, you should seek financial advice prior to 1 January 2016, so that you can plan for this change]
Of course everyone at businessDEPOT would love to help you with any further enquiries you may have on what the budget means for you and your super.
Feel free to contact any of our team or super specialists via phone on 07 3193 3000, email, or connect with us on LinkedIn, Facebook and Twitter for all up to date insights and value bombs to help you #MAKEITHAPPEN.
Check out some other businessDEPOT Super resources here