Industry braced for Budget changes

The financial services industry is braced for change from tonight’s Federal Budget – some good, some bad.

The most widely expected change, flagged in Money Management on 28 April, is that the Government will tidy up arrangements around its so-called ‘Simpler Super’ regime and the excess contributions tax, consistent with lobbying from a wide cross-section of the industry.

The changes, at the margin of the Government’s original legislative package, are expected to see an end to the circumstances where some people who inadvertently found themselves in breach of the excess contribution rules, faced an accumulative tax rate of 93 per cent.

However, while the industry has broadly welcomed suggestions the Government will address the excess contributions issue, there is concern that its desire to bring the Budget back into surplus by 2013 will see it altering some of the arrangements around the so-called transition-to-retirement (TTR) regime implemented out of the Howard Government’s last Budget.

A number of commentators, including former Prime Minister, Paul Keating, have previously suggested that the TTR arrangements represent a considerable drain on the Budget and are unsustainable over the longer-term.

Virtually all of the major financial services industry organisations have warned the Government about the negative impact on investor sentiment of tinkering with the policy and regulatory settings around superannuation.

A number of reports have also reminded investors that many of the superannuation and investment initiatives announced in last year’s Budget, including a change in contribution caps for those aged over 50, have yet to find their way into legislation.

Money Management will be providing special post-Budget coverage tonight.