The Government confirmed each of its pre-Budget announcements with one exception, which was announced before the Budget. In response to industry concerns regarding compliance costs, the Government will not be going ahead with the proposal to limit the higher cap on concessional contributions to super account balances below $500,000. So, when the higher general concessional cap of $35,000 comes in (around 2018), it will apply to all going forward.

Of particular interest to life companies and retirees is the Government’s proposal to exempt from tax the assets held by life companies to fund deferred lifetime annuities. By doing so, the Government will provide these products with the same tax concessions as other super pensions. This is a significant change towards making these types of retirement products more attractive to retirees. These products are purchased with an upfront payment (or premium) but the income stream is not paid until a later date. For example, the product may be purchased at age 60 but the income payments do not start until age 70 after which they continue for life.

The Government will establish a Council of Superannuation Custodians to ensure that future superannuation changes are consistent with an agreed Charter of Superannuation Adequacy and Sustainability. This seeks to answer one of the concerns of industry that continued tinkering with the system undermines public confidence in super.

As an incentive to remain in the workforce and continue saving for retirement, super guarantee contributions will be an entitlement for workers aged 70 and over from 1 July 2013.

Funds

From an asset management perspective the Budget was pretty uneventful. However, the private equity industry will be smiling, since the Government will make changes to the Venture Capital Limited Partnerships and Early Stage Venture Capital Limited Partnerships regimes to encourage increased investment. These include changes to ensure capital account treatment for gains on disposal of investments held for more than 12 months.

Financial planning

The financial advisory industry has known for some time that from 30 June 2013, the exemption for financial advisors from the tax agent services licensing regime will end. From that date, financial planners will need to be registered with the ATO. The Government will provide for a single online registration, the budgeted cost of which is intended to be funded through the charges the ATO will impose for registration.