Pre-budget proposals target high-income earners
High-income earners' savings could be hit if some proposed changes to superannuation taxes are passed in the upcoming federal budget, says investment manager Centuria Life.
In a statement, the company said changes to super tax incentives are likely to focus on taxing the contributions of higher earners at a higher rate and making the discount for capital gains tax for super funds less generous.
This means high-income earners are searching for ways to supplement their super, said Centuria Life general manager, Neil Rogan.
"For those planning for retirement and their advisers, uncertainty about super means the search for tax effective structures to supplement super is well and truly on," he said.
"Those on higher incomes may want to consider their options and savings strategies to supplement their super before any changes come into effect."
Some of those add-on strategies include investing in bonds, which has income taxed at the corporate rate of 30 per cent and re-invested within the bond structure. Investors do not have to declare the re-invested income on their tax returns, Mr Rogan said.
"This means that after 10 years, investors have paid a maximum 30 per cent tax on their investment returns, very attractive to investors in the highest tax bracket and currently paying up to 49 per cent tax," he said.
"When you look at these features, the benefit of using an investment bond to supplement super, especially for high net worth investors, those who've reached their cap, or who don't meet the work test so cannot contribute more at a tax-advantaged rate, is clear.
"So the message is the news about super may not be as bad as it seems on budget night," said Mr Rogan.
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