Overview of the Henry Report 7 May 2010Dolfinwise Financial Planning

A summary of the Henry report’s impact on superannuation and the Rudd government’s response

7 May 2010

A brief summary of the Henry Tax Recommendations relating to superannuation tax and retirement income include:

	Concessional contributions tax should be abolished and replaced with employees marginal tax rate paid by the employee in their tax return. In addition, subject to annual limits, all contributions would attract a tax offset payable to contributors;
	All earnings of superannuation funds should be taxed at a rate of 7.5 per cent;
	The $50,000 transitional cap for contributors aged 50 or older should be continued indefinitely;
	Superannuation balances should be included in Age Pension means tests on the same basis as other savings;
	The development of longevity insurance products should be encouraged and the government should consider offering such products itself;
	Care services for the aged should in general be separated from accommodation choices and provided on a means tested basis — preferably, any future compulsory funding levies should apply to all personal taxpayers and not be linked only to the superannuation guarantee.

Rationalising and streamlining the current small business capital gains tax concessions by removing the active asset 50 per cent reduction and 15-year exemption concessions;
increasing the lifetime limit of the retirement exemption by permanently aligning it with the capital gains tax cap for contributions to a superannuation fund; and – allowing taxpayers who sell a share in a company or an interest in a trust to access the concessions via the turnover test.

Note these recommendations are not law or even government policy at this stage and many are likely not to be implemented.

The Rudd government has made the following announcements that it intends to legislate should it win the next election:

	The gradual increase from 9 percent to 12 percent in the Superannuation Guarantee (SG) Contribution over the years 2013 to 2019;
	Increasing the age in which Superannuation Guarantee is to be paid on behalf of workers from age 70 to 75;
	Introducing a ‘super subsidy’ of up to $500 placed into superannuation to offset the superannuation contributions tax for those people on an income less than $37,000;
	Extending the $50,000 concessional contributions cap for people aged 50 and over (currently due to expire on 30 June 2012) with balances of less than $500,000.

Some of these changes if they are legislated will require an adjustment of strategy for many clients. We look forward to assisting our clients with this process if and when it becomes necessary.

Jason Bragger CFP DipFP BSC BA
Director - Dolfinwise

(07) 3831 5990

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