Super is safe, at least for now
Whatever the outcome of the September 7 election, major super policy changes are unlikely to be made over the term of the new government. Both the main parties have promised not to make significant changes (other than those announced before the election was called) over a five-year period. The Coalition has left open the option of beneficial adjustments to the system. In the event of a Coalition victory, however, lower-income taxpayers could lose out if, in government, the Coalition succeeds in reversing as promised the new 15 percent rebate of superannuation contributions tax received by taxpayers earning less than $37,000 a year. That would reduce the build- up of superannuation benefits for taxpayers affected by up to $500 a year.
The proposed three-year delay in the increase of the level of compulsory super from the current 9.25 to 12 percent would also slow the accrual of benefits for taxpayers receiving only the minimum compulsory employer contributions. These reductions in the annual amounts of new employer contributions will be relatively small, however.
The more important driver of account balances will continue to be the investment returns achieved by funds. If, as widely expected, the election outcome results in an increase in investor confidence, there is a possibility last year's outstanding investment returns will be repeated. But with the economy slowing and interest rates now at historic low levels, a more realistic expectation following a month when the sharemarket increased 2.7 percent is for a good but not exceptional year because of continuing strength in the sharemarket.
Such an outcome would be the icing on the cake for older super fund members able to access their super either as a lump sum or as an ongoing pension. With major new tax changes ruled out for the next five years, high superannuation fund returns will automatically flow through to investors.
There is still uncertainty about whether the Coalition if elected would proceed with Labor's pre-election decision to introduce a 15 percent tax on pension fund income of more than $100,000 a year. Even if this tax does proceed, superannuation pension income will still be attractively taxed compared with other investment options for the small proportion of people likely to be affected.
The biggest bonus for older workers is that both parties appear to be committed to allow tax deductible contributions up to $35,000 annually for people aged 50 or more after July1, 2014. This year, the higher $35,000 annual allowance is available only to those aged 60 or more. All things considered, the fear of superannuation policy changes is unlikely to be an issue over the next three years despite the continuing budget problems the next government will definitely face.