In his 1964 classic, ‘The times they are a-changin’,’ the great song writer Bob Dylan implored people to move with the times. While this was written in the context of the civil rights movement in the US, constant change has become part of modern life. This fact makes the 51 year old song as relevant today, as ever.

Nowhere does this seem to apply more than in Australia’s retirement savings system. Although that system has been reasonably stable since 2007, the calls for change are again ringing loud. This time it is driven by a belief that our superannuation system is too generous.

With recent comments being made to the press by our new Prime Minister and Treasurer, it seems that some changes might be in the air. This could mean that there is currently a limited window of opportunity to take advantage of the current rules before they are replaced by something less generous.

So what elements of the current system are potentially under threat? We don’t yet know. However, we have broken out our Elston crystal ball to try and identify the areas that could potentially be under most threat;

  • Non concessional contributions – the ability to transfer large sums of money into the low tax super environment might be curbed, or eliminated completely.
  • Concessional contributions – tax deductible contributions might be taxed at higher rates within super, for those on higher than average incomes.
  • Transition to Retirement Pensions – as these pensions are often used as part of a strategy to reduce tax, it is possible that access to these pensions could be reduced. Or they could be abolished completely.
  • Tax Exemption on Pension Earnings – for those with larger super balances, it is possible fund investment earnings may be taxed, where currently tax free.
  • Tax Free Pension Payments – fully tax free pensions for the over 60’s could be under threat, with some tax levied for those with higher annual pension incomes.

There is no certainty that any of the items discussed above will be changed. Nonetheless if changes do come then it will be those that have taken full advantage of the current rules who may be able to lock in a lifetime benefit.

Any change would likely come in the May 2016 budget. This could apply either from budget night, or perhaps 1 July 2016. A mini-budget at an earlier date to address these issues also cannot be ruled out.

While the benefits of the system should be incentive enough, the risk that some of these advantages may not last should encourage action. The opportunity to take advantage of current concessions may be something that is never repeated.
Elston encourages people to review their situation and talk to their advisers ahead of the May budget to assess their situation. Bob Dylan said it best, when he sang ‘Then you better start swimmin’, or you’ll sink like a stone, for the times they are a-changin’.’

The information and predictions made in this article are based on reasonable assumptions, but are not certain. You need to consider your personal situation and your understanding of the Australian retirement system before acting on any of the information provided.

If you would like more information please call 1300 ELSTON or email info@elston.com.au and an adviser will be in touch.