Federal Budget: 5 Things to Know

We’ve compiled a brief breakdown of a few topical subjects from the recent Federal Budget that we thought you’d like to know. 

 

1. $3m total Super Balance Tax 

Whilst there wasn’t much new information following the consultation paper released on this back in March, it is the key proposed change for superannuation contained in this budget. The proposal is that from 1 July 2025, earnings on an individual’s total superannuation balance of more than $3m (not proposed to be indexed) will attract an additional 15% tax. Earnings will be calculated by the difference in an individual’s total superannuation balance between the start and end of the financial year, adjusted for contributions & withdrawals. Then, this is multiplied by the % of the total balance that is above $3m. Assessment and payment will be similar to the process some of you are familiar with for Division 293 tax (i.e., the ATO will calculate it and send a nice letter informing you of any additional tax payable). Any negative earnings can be carried forward indefinitely and offset future earnings. Regarding defined benefits, they have said a ‘commensurate treatment’ is intended to apply to these, however no guidance on how this will be calculated has been provided yet.From a planning perspective, superannuation continues to be a tax preferred environment even with this new tax being put into place, and a key strategy for clients with large super balances would be to try and even up balances between spouses to prevent one partner going above the $3m balance whilst the other is far below the threshold…

 

Full Article reserved for dozzi’s Premium Investment Service.

Premium Investment Service (May)

Inflation Outlook — Take 2
The inflation outlook is the proverbial million-dollar question at the moment. In September last year we put together an inflation outlook piece (based on US CPI) that predicted inflation will peak and then fall rapidly in early 2023. So far, so good. But the big question now is – will it keep falling or level out somewhere above central bank targets? And if so, at what level will inflation baseline?

This thematic looks at the underlying components of inflation and draws upon lessons of the past to see if we can garner any insights as to central banks’ abilities in getting structural inflation down.

Main Points: 
1. Services CPI is a worry. Looking back to the 1970s – another epoch where there was an exogenous inflation shock – services CPI stayed belligerently high and indeed put a floor under Headline CPI falling below 5% in the US. Is history about to repeat itself and therefore our ‘terminal, terminal’ scenario is a foregone conclusion?…


Full Article reserved for dozzi’s Premium Investment Service.