The WeathPartners Team recently received two communications that concisely summarise the changes we can expect from the new Liberal Government.
The first, Oliver’s Insights Ed. 28 – Australia’s New Government offers a good summary of what the changes mean from an economic stand point. Please click to view a downloadable copy of the article.
The second, from Colonial First State entitled “Election 2013 – the wash up”, offers a very good recap of the Coalition’s policy commitments that we felt was worth sharing. The current policy commitments are at this stage only proposals as official legislation for each of the policies will still need to be passed before they can take effect. Our advisers have chosen the most important points from the article and included the excerpt below:
Delay in Superannuation Guarantee (SG) increase to 12%
While the Coalition has stated that it is committed to increasing the superannuation guarantee from 9 to 12 per cent, it intends to delay the increase by freezing the SG rate at its current level of 9.25% for two financial years. As a result, the SG rate is not expected to reach 12% until 2021-22.
Scrap the $500 low income earner superannuation contribution
The Coalition intends not to proceed with the $500 low income earner contribution.
Under existing legislation, a taxpayer earning less than $37,000 qualifies for a payment of 15% of their concessional contributions up to a maximum of $500. The payment is made to the taxpayer’s superannuation fund and is designed to offset the tax payable on the taxpayer’s concessional contributions.
Review contribution caps and co-contribution
The Coalition will revisit concessional contribution caps and incentives, such as the super co-contribution, once the Budget is back in strong surplus.
Review penalties for breaches of contribution caps
The Coalition will consult with key stakeholders in the superannuation industry to develop an appropriate process that addresses all inadvertent breaches of the contribution caps where an individual can show that their mistake was genuine and the error would result in a disproportionate penalty.
Improving quality of superannuation fund member reporting
The Coalition has stated its intention to improve the quality of information available to super fund members and employers so that they can make informed decisions when comparing relative performance of funds.
The Coalition proposes to consult with industry and APRA to implement industry-wide definitions and performance benchmarks that will enhance super fund comparability and competition, including:
- standard reporting of fees
- standard reporting of gross and net returns on individual investment options, and
- comparable definitions for asset classes and investments.
Review default fund selection arrangements in awards
The Coalition has indicated that it will review the current default superannuation fund system with a view to increase genuine competition and transparency in the selection of default funds in awards.
Improving superannuation governance
The Coalition intends to align corporate governance in superannuation funds more closely with corporate governance principles applicable to ASX listed companies. Specifically:
- appropriate provision for independent directors on superannuation fund boards
- mandatory disclosure of conflicts of interest; and
- a requirement for specific advice to be provided to APRA by those who intend to sit on multiple superannuation fund boards that there is no potential for conflicts of interest.
Streamline employer superannuation reporting arrangements
The Coalition will streamline small business employer superannuation reporting by implementing a superannuation clearing house through the Australian Taxation Office. Under this proposal, small business
would report superannuation payments to the ATO instead of having to submit additional forms to Medicare, which currently manages the government’s clearing house.
Review regulatory barriers restricting income stream product development
The Coalition will review regulatory barriers currently restricting the availability of relevant and appropriate income stream products in the Australian market.
The Coalition will work with the financial services sector and regulators to encourage the development of innovative products whilst ensuring appropriate safeguards are in place to protect consumers.
Review retirement income stream minimum payment levels
The Coalition will conduct a review of retirement income stream minimum payment levels to assess their adequacy and appropriateness in light of current financial market conditions.
Reduce company tax rate by 1.5%
The Coalition proposes to cut the company tax rate by 1.5% from 1 July 2015. However, for large companies, this will be offset by a 1.5% levy on taxable income above $5 million as part of the paid parental leave scheme.
Abolish carbon tax and minerals resource rent tax
The Coalition intends to abolish the carbon tax as well as the Minerals Resource Rent Tax (MRRT) within its first term of Government. However, the Coalition has committed to keeping many of the compensation
arrangements introduced as part of the carbon tax scheme. These include keeping:
- the current marginal tax rates, and
- the fortnightly pension and benefit increases.
However, as part of abolishing the carbon tax and MRRT the Coalition intends to cut a range of other spending measures. These include discontinuing or removing the:
- instant asset write-off concessions
- accelerated depreciation for motor vehicles
- phasing down of interest withholding tax on financial institutions
- tax loss carry-back measure
The Coalition also intends to discontinue a range of industry and job support schemes as well as a number of clean energy grant programs introduced as part of the carbon tax package.
Paid parental leave scheme
The Coalition will change the paid parental leave scheme to provide parental leave at the woman’s full replacement wage for 26 weeks, rather than the current 18 weeks.
In addition, paid parental leave will include superannuation contributions at the compulsory superannuation rate based on a woman’s actual wage.
Administration of the scheme will also change, moving from business to the Family Assistance Office.
The Coalition will implement a Healthy Life, Better Ageing Agreement which is a five year agreement informed by the Productivity Commission’s Caring for Older Australians Report.
Proposed changes include cutting red tape, changing the Workforce Supplement and increasing funding for dementia research.
Future of Financial Advice
In The Coalition’s Policy to Boost Productivity and Reduce Regulation policy document released in July, the Coalition announced that it intends to reduce compliance costs for small business financial advisers and consumers who access financial advice.
The Coalition intend to implement all 16 recommendations made as part of the Parliamentary Joint
Committee inquiry into FOFA. These changes include:
- Complete removal of opt-in
- Simplification and streamlining of the additional annual fee disclosure requirements
- Improving Best Interests Duty
- Providing certainty around the provision and availability of scaled advice
- Refining the ban on commissions on risk insurance inside superannuation.
If you have any questions on how the new government’s proposed policies may affect you, please don’t hesitate to contact your adviser on (02) 9955 1988.