With just over a month before the pre-election early budget clarifies the government's policy intentions, there's still time to implement decisions which could help reduce the adverse impact of any changes.This is especially relevant for superannuation strategies that could be subject to major changes to generate budget savings.
The good news is this is an election budget and therefore unlikely to contain unpopular new initiatives. But the need for budgetary savings means significant policy changes, especially those in areas unlikely to affect the general population, are quite possible.
The government has already dismissed the possibility of major changes to negative gearing tax arrangements such as those proposed by Labor to apply from July 1, 2017. This means geared investors have ample time to review their strategies after the budget is delivered and all is revealed.
On the superannuation front, the situation is different with a high possibility of changes applying from budget night. While it's easier for the Australian Taxation Office to administer changes commencing at the beginning of the financial year, the government has in the past applied the new rules from budget night.
Perhaps the easiest cases where implementing decisions before budget day can pay off are where the decision to act in June before the end of the tax year has already been taken. Bringing forward a superannuation contribution by a month or two may create minor cash flow problems, but the benefit is tangible in avoiding any adverse budget impact.
Pre-budget speculation has focused on the possibility of a reduction in the annual concessional and non-concessional contributions caps and the ability to start a tax-free transition to retirement pension while still working.
For people aged under 65 and eligible to make a non-concessional super contribution of up to $540,000 by bringing forward two future year contributions, a budget change could see this opportunity reduced in value.
There are traps in making these non-deductible contributions for people of less than retirement age. Since 1999, all new super contributions are untouchable until retirement age. The key issue is to ensure you won't need access to voluntary super contributions until retirement.
In this respect, people already retired or still working and able to start a transition to retirement pension, generally those aged 56 or more, can reduce the risks of adverse budget action by making additional contributions and starting their pensions before budget night. It would be very difficult and unpopular for the government to make adverse changes for existing transition to retirement pensions and people already retired have full access to their super balance at any time.