The Federal Election Policy Update; What’s in and What’s Out?

On the 7th of September Tony Abbott’s coalition won the Federal Election. As is the norm, a change in government means a change in legislation. LJ Financial reviews the possible changes to superannuation, taxation and the Future of Financial Advice. 

Taxation Changes
The abolition of the carbon tax was one of the major reforms promised by the coalition. This would not only mean abolishing the carbon tax but also the minerals resource rent tax. Subsequently, the coalition will also be discontinuing the tax loss carry back measure, phasing down of interest tax on financial institutions and the accelerated depreciation for motor vehicles.

Another possible major change is the intended reduction of the company tax rate by 1.5% by July 2015. This however comes with a rather large condition that this 1.5% reduction will be offset by a 1.5% levy on taxable income above $5 million for businesses. This revenue will form part of the paid parental leave scheme.

Superannuation Changes
The coalition has indicated that it may slow down the Superannuation Guarantee increase by 2 years, meaning that the 12% cap will be in force as of 2021/22. This will be facilitated by freezing the current 9.25% rate for an additional 2 years.

The new government is also proposing to scrap the low income earner superannuation contribution. Previously, those who did not earn more than $37,000 p.a would receive 15% their concessional contributions up to $500 as an additional government contribution. This is currently funded by the mining tax so will by all accounts likely be removed as a benefit to low income earners.

The coalition is also looking to improve the method of reporting by the superannuation fund to its members. This initiative is to help members and employers decipher the fees and performance of the fund compared with other superannuation funds.

Other superannuation potential changes fall under the area of the improving corporate governance through aligning the superannuation governance with the standard corporate governance regulations applicable to ASX listed companies, a streamlining the employer superannuation reporting arrangements via a dedicated ATO clearing house and reviews of income stream regulations, contributions caps and the penalties for breaches of contributions caps.

Other Changes
Other possible changes that may occur include the pay parental leave scheme which will entitle a woman’s full replacement of wages for a period of 26 weeks, rather than the current 18 weeks. In addition there are scheduled reforms in relation to aged care and benefits and finally there may be changes to the Future of Financial Advice reforms including the scrapping of the opt-in policy, improving the Best Interests Duty and refining the fee disclosure requirements.

As these are potential reforms are not actual drafted legislative reforms at this stage it is important that people do not act to preempt these changes. That being said it is important that an individual remain informed and educated on these changes particularly in the areas of taxation and superannuation, as those who are engaged in their personal finances, including their superannuation, ultimately end up in a better position in the long run.



Duncan Brown
Private Wealth Adviser