Understanding super ahead of the Federal Election
On 2 July 2016 Australia will decide. And if Newspoll figures are anything to go by, this is going to be one of the most evenly contested elections in recent memory.
Superannuation has been one of the big topics covered by the media, following a raft of changes announced by the government in this year’s Federal Budget.
As superannuation fund Equip notes in this blog post, “In general, both parties are committing to more evenly distribution superannuation benefits. This means winding back some concessions for Australia's wealthier superannuants and high income earners, while providing on-going help through concessions for low income earners.”
We’re going to take a look at several of the key points of difference between the parties regarding super, so you can decide which party best deserves your vote.
Low income assistance
The major parties differ slightly when it comes to the nature of low income assistance. If elected, the LNP would introduce a Low Income Superannuation Tax Offset (LISTO) which would see individuals earning less than $37,000 a year to pay a $500 tax offset. The ALP instead would retain the current Low Income Super Contribution (LISC) scheme which puts $500 of super a year into the accounts of those earning less than $37,000 a year.
Transition to retirement pensions (TRPs)
The parties differ a little more in terms of transition to retirement pensions. The LNP wants to tax investment earnings at 15 per cent (in line with super accounts) and the maximum allowable start-up balance for TRP will be $1.6 million. On the other hand, the ALP would apply 15 per cent tax to annual investment earnings within the TRP in excess of $75,000.
Retirement income streams
There’s also a slight point of difference between the parties when it comes to retirement income streams as well. If the LNP are voted back in the maximum allowable start-up balance will be $1.6 million. And, as stated earlier, if ALP manage to get your vote they will have apply 15 per cent tax to annual investments earnings in a TRP that fall in excess of $75,000.
Casting your vote
In the end of the day it comes down to a matter of personal preference and while the changes to superannuation should come into consideration there are other determining factors that you should also reflect on before casting your vote.
As best-selling author and finance expert Noel Whittaker argues, “Ultimately, it’s important to make sure you’ve consulted a financial advisor. Whether Labour or Liberal win the election you’re going to be affected. It’s important that you make the right decisions for your finances.”
Does the difference between the two parties change who you’re likely to vote for? What do you make of the flagged changes?
Share your thoughts in the comments below.
Equip manages $7 billion of investments for members working across a wide range of Australian industry sectors. This superannuation fund has been providing strong investment performance and has been a reliable provider of retirement benefits for over 80 years.
Related links:
Size doesn’t always matter when it comes to super
Super is changing. Should I be concerned?
Australia needs retirement income diversity