The media has been rife with pre-budget speculation about changes to superannuation for the past few months:
“Turnbull Government expected to crack down on superannuation” Herald Sun April 20 2016
“Smart super moves to make before the May budget” SMH Feb 14 2016
“Superannuation changes in or before budget, Scott Morrison says” The Australian March 15 2016
However whatever is in the media is just that, in the media. Governments are notorious for using the media as sounding boards to gauge public reaction and the media is just interested in selling their agendas and advertising. It is a truism that there is nothing so old as yesterday’s news.
Quite simply this is budget speculation 101. Even if it gets presented there is a less than 50% chance of it getting through. Rudd, Gillard & Abbott all had major budgetary policies that were either killed off by their caucus or by the cross-benchers.
This is compounded by the fact that there is an election in a few months and the budget is simply setting out an election platform. Things are highly likely to change and even if these media speculations prove to be accurate, legislation would be 12 months away and there would be another budget in between.
To a large extent this is anxiety fueled uncertainty – leaving people wondering “What if I don’t do anything will I be hit by higher taxes or miss out on possible opportunities?”
Pre budget decisions
If you are concerned about the speculated increases to contribution taxes and limits being applied to total annual contributions, then it is best to use a decision framework. Rather than react out of a fear of missing something. Mostly importantly, don’t be influenced by the views of unhappy or financially insecure people.
There are two criteria in the decision framework:
- If you are planning to make any changes to your superannuation and there is no cost then do it.
- If you are planning to either do something or nothing but either action carries a cost or a risk then re-consider. Your decision is being driven by media speculation and may not be in your best long-term interests. That is where strategic plans come into play.
Superannuation is valuable
Nonetheless, budget changes or not, none of this affects some essential truths about superannuation:
Superannuation is a good thing
Providing for your retirement is a good thing. To be financially secure when you retire gives you independence from the government and enables you to make choices – to enjoy the lifestyle you want.
Tax effective saving
Superannuation is still the most tax effective long-term savings vehicle there is. Nothing beats it. Even if the mooted tax increases come into being that is still the case. It makes sense to make the most of it by maximising your contributions.
Safe and steady wins the race
Superannuation works best with a well-considered strategy consistently executed over a long time. This is what drives its success. For most high income earners getting more money into superannuation is their bigger challenge.
Therefore superannuation is not the right vehicle for speculative or high risk investments. Should these fail your super will never recover. Nor will you be able to top it up to make up for the shortfall.
High risk high return investment strategies are best executed through other platforms.