Adapting to Change
Posted: September 09, 2009
Adapting to change is particularly important in financial planning where the tax, superannuation and social security rules regularly change. We are likely to be coming to another period of significant change because of the many ‘reviews' that have been introduced by the Federal Government including those examining the future tax system, pensions and superannuation.
The Harmer Review
This review examined the adequacy and targeting of the pension system - both the age pension and the ‘working age' pensions such as the Disability Support Pension and the Carer Payment. It reported in February and some of its recommendations were included in the May Budget such as an increase in the base rate of pension, an increase to the age pension age to 67 and better ways to encourage people to work after pension age.
The report made other recommendations including:
• Aligning the age at which superannuation can be accessed with the age pension age,
• Tightening eligibility for the Commonwealth Seniors Health Card,
• Simplifying means testing,
• Aligning the means testing of superannuation pensions with other financial products, and
• Improving incentives for work and saving.
These recommendations will probably be considered as part of the Henry review.
The Henry Review
This review is examining the current tax system (except the GST) and looking at ways to position Australia to deal with the demographic, social, economic and environmental challenges of the 21st century. The review is wide ranging including transfer payments such as family tax benefits and social security payments and even considering taxes on road usage.
A preliminary report in May recommended amongst other things:
• Retaining the 9% superannuation guarantee,
• Making the tax concessions for contributions ‘fairer' by broadening access to them, and
• Seeking ways to improve people's engagement with the retirement system.
Other possible changes that have been canvassed are:
• Ways to extend the super guarantee to the self employed,
• Review of the dividend imputation system in line with reducing the company tax rate,
• Further increases in the age pension age (beyond the 67 already announced),
• Restrictions on negative gearing (that is being able to offset losses from one source against income from other sources),
• Funding of aged care accommodation and services, and
• Encouraging the development of products to manage longevity risk (the danger that you will run out of money in retirement).
The final report is due by the end of 2009 and it may take some years before the Government considers and implements any changes.
The Cooper Review
This review is examining the structure and operation of the superannuation system. It is hoped that its recommendations will lead to increased efficiencies, lower costs and fees and in turn lifting long-term rates of return. It is due to report by June 2010.
Whatever the outcomes of these enquiries you need to be aware that more change is coming - some of it may benefit you and some may not. It is just one more reason why we believe a regular review of your financial affairs is critical.
