Markets rebound on Coalition win


Chris Bowen, the Labor Party Treasurer told a group of elderly voters that if you don’t like our policies then don’t vote for us - it seems that self funded retirees and aspiring self funded retirees took his advice. As a result, local share markets rebounded today by about 1.5%, with the biggest gains seen in higher dividend yielding stocks, such as the banks (up about 5%-6%). 

So now that the Coalition has been returned to Government, the following is a snapshot of the current post-election 'superannuation/taxation' landscape...

> Franking credit cash refunds to remain. However, the 'cost' of imputation may still lead to change in the future (but way into the future).

> Current negative gearing rules and capital gains tax discount for investments to remain. With this uncertainty removed, improved confidence (coupled with potential rate cuts and a loosening of lending policies) has the potential to turn property market sentiment around.

> Planned income tax-cuts likely to be passed by parliament before June 30th.

> Non-concessional contribution cap remains at $100,000. This was expected to be reduced to $75,000 by a Shorten Government.

> Catch-up concessional contributions remain. The ability to make ‘catch-up’ contributions only came into effect last July, and was designed to allow people with interrupted work patterns, such as a mother who goes on maternity leave, to make additional super contributions when they return to work and still receive the same tax concessions.  

> Deductibility of personal contributions within the $25,000 cap remain.Concessional contributions include your employer’s compulsory super guarantee contribution of 9.5%, salary sacrifice contributions and personal  contributions you make and claim a tax deduction for. They are capped at $25,000 in total. Until recently, the third category was only available to “self-employed” persons who satisfied the “10% rule”, that is, they received less than 10% of their income in wages or salary (ie genuinely self-employed). Last year, the Government scrapped the 10% rule so that anyone who was eligible to contribute to super could claim a tax deduction for personal super contributions (within the overall concessional cap of $25,000). This was designed to assist, amongst others, employees whose employer didn’t offer salary sacrifice facilities.

> Higher income super tax remains at $250,000+. A higher tax rate (effectively 30%) applies to concessional super contributions made by higher income earners. Originally introduced to apply to persons on incomes of $300,000 or more, the threshold was reduced last year to $250,000. A Shorten Government would have reduced this to $200,000.

> SMSFs can still borrow. Shorten’s Treasury Spokesman Chris Bowen had stated that an incoming ALP Government would change the law to prohibit SMSFs from borrowing.  

> 6 Member SMSFs are now guaranteed, paving the way for SMSFs to add on other family members, like children, to their SMSFs. This is a negative for Industry Super Funds who will now face increased regulatory scrutiny, and finally be forced to have truly independent boards.

Rick Maggi, Certified Financial Planner.