Central Coast Accountants

How those with superannuation will be affected by new taxes

Published on February 18, 2019 at 12:00 AM

As we gear up towards the next federal election, there has been many articles written regarding “tax grabs” by both Liberal and Labor, especially covering the superannuation field. Government is looking to plug revenue gaps due to increasing costs of administering the Australian economy, coupled with increasing numbers of baby boomers entering their retirement phase.

The superannuation area seems fair game for both parties due to the volume of funds continuing to flow into this area. The retirement of an ageing population, and the knowledge that the Government hasn’t sufficient funds to provide an age pension, has prompted these Government policy changes.

Taxpayers who have a Self Managed Superannuation Fund (SMSF), retired, on a pension, and/or have investments with franking credits attached will be the hardest hit by the proposed changes to the treatment of imputation credits.

A retired couple could potentially lose a cash flow of approximately $25,000, dependent on the level of their investments.

The major question is how they then replace the shortfall? Many will choose to sell some of their investments, lose more cash flow and continue onwards into a downward spiral each year. At the extreme end of the scale we have retired couples who own a small share portfolio and rely on the cash flow from the imputation credits to live on. These couples would ultimately have to sell their portfolio to enable cash flow. The question for these retirees then becomes, once their capital funds are exhausted, where do they obtain additional funds for cash flow purposes? These looming challenges into the future mean that major thought, and decision making will be required by both types of investor.

In what looks set to be an aggressive and ideologically-driven federal election, are these people who can ill afford major disruption to their living incomes set to be just a casualty of the political war in Australia, which seems to put the interests of the parties above the goodwill of the common people?

Should you require any assistance regarding this proposed dilemma, please contact our office so we might steer you in the right direction.