One thing we’ve regularly witnessed over the past three years is the constant factional fighting that has plagued the Labor federal government. However, I never thought it would spill over into the superannuation sphere as it did in April.
The infighting was so intense the government was forced to show its hand on what changes would be made to superannuation well before the budget.
Since the announcement on 5 April, the overall reaction to the proposed changes has not been as severe as was expected and the government’s aim to tax the “fabulously wealthy”, and this would almost have to be synonymous with SMSF members, has been achieved.
This summation is based on the fact earnings over $100,000 from super assets that are being used to support pension payments will be taxed at 15 per cent from 1 July 2014 onwards.
This threshold assumes an anticipated rate of return of 5 per cent, with the logical extrapolation concluding only individuals with superannuation balances of at least $2 million would be affected. In real terms, we are told this will only affect 16,000 Australians.
But can we put our entire faith in these calculations?
Many economic commentators are now exhibiting the courage to say the economy has definitely turned the corner and we are heading back into a bull market. And while we may not see investment returns climb back up to levels enjoyed before the global financial crisis, it is plausible to believe they may get back to low double digits in the wake of a long-wished-for recovery.
This would mean the net cast to tax the fabulously wealthy would all of a sudden become a lot wider, to the extent ‘fabulously’ or ‘wealthy’ may no longer be accurate adjectives for the unlucky ones.
The situation could almost dictate that people won’t want their super returns to shoot the lights out; certainly counterproductive thoughts for individuals looking to fund their own retirement.
One thing to remember in these circumstances is the estimate the government made of how many people would fall foul of the rules when it lowered the contributions caps to $25,000. Originally we were told it would only be 2000 superannuants, but that quickly blew out to 72,000, with no remorse or genuine attempt to fix this so-called unintended consequence.
But dodgy maths aside, the main point still seems to have been missed.
As mentioned before, plenty of people in the know seem to be breathing a sigh of relief that the changes weren’t that bad and most people have effectively dodged a bullet.
Maybe a more accurate statement is that most people have dodged this bullet. And if that’s the case, the general public will still be wondering when it will be their turn to be slugged in the next great super shake-up.
If there is one thing human beings don’t like, it is uncertainty and again changes to superannuation have fuelled such sentiment.
It would seem we’d be able to train monkeys to understand this concept by now, but apparently not our elected officials.