Budget could see big changes to tax and super

BT head of financial literacy and advocacy Bryan Ashenden said the federal budget, due to be handed down on 6 October, could be a very interesting one this year depending on how the government responds to the economic impact of COVID-19. 

“If the government wants to make some significant changes to the way things have worked in the past, they may decide this is the time to do it,” Mr Ashenden said in a BT Technical Services webinar.

Mr Ashenden said the government may consider whether the age pension system or welfare system is operating effectively and whether there needs to be changes in terms of income testing and asset testing.

“Will they [increase] the preservation age to encourage people to work for longer?” he questioned.

“Is it a time where [they decide] to change the taxation of the superannuation system? Where we move from a 15 per cent flat rate and zero per cent rate in retirement to having some taxation on earnings? Will it become the marginal tax rate less 15 per cent during accumulation?”

Mr Ashenden said all of these types of questions could come up for consideration, depending on the outcomes of the retirement income review. 

The other item the government may announce, he said, is what the government plans to do in relation to the income tax rate changes. 

“There has already been talk about bringing forward the changes that were initially due to take effect from 1 July 2022 and whether they will be brought forward to 1 July 2021, or even brought forward to apply to this financial year and whether those other changes that were due to take effect 1 July 2024 will also be brought forward,” he said.