Budget 2016 to target HNW Australians

While GST, negative gearing or corporate tax rates are persona non grata two months out from a federal election, superannuation is shaping up to be the sweet-spot within this year's Federal Budget.

Higher income earners with superannuation balances in excess of $500,000 and a liking for luxury cars, cigarettes and a 'tipple or two' are expected to be caught in the crosshairs of Federal Budget 2016 on 3 May.

The government has made no secret of the fact it wants 'better heeled' Australian's to do more of the heavy lifting when it comes to badly needed budget repair. As a result, superannuation concessions for high income earners and those with larger balances are likely to be lowered on budget night.

Here's a look at the likely implications for investors from Budget 2016.

High income earners

The $300,000 high income threshold, currently subject to an additional 15% super contribution surcharge on their concessional contributions, could be reduced to $180,000 drawing an extra 244,000 taxpayers into the higher tax net.

However, a reduction from $300,000 to $250,000 is a more likely outcome.

Larger super funds

To level the superannuation playing field between low and higher income earners, superannuation balances over $500,000 could be in for a doubling of the 15% tax rate to 30%, and if marginal tax rates are applied, this could rise as high 47%.

CGT increase

Federal Budget 2016 could also see capital gains on super fund earnings increase from 10% to 15%, and the 50% capital gains tax (CGF) on property held for over one year cut by between 40% and 75%.

While it's unclear how the latter could be implemented, any changes are likely to take effect on any purchase immediately following the announcement.

Budget repair levy extension

There's growing speculation that the Federal Budget 2016 may adopt a recommendation by economic think-tank, the Committee for Economic Development of Australia (CEDA) to help return the budget to surplus by 2018-2019, by extending the 2% budget repair levy on high income earners for another two years.

Lower caps

Budget provisions may lower the cap at how much money workers can pour into their super account at the concessional tax rate of 15 cents in the dollar, from the current limit of $30,000 annually for those aged under 50 closer to $20,000.

Removal of TTR

The ability to commence a transition to retirement income stream (TRIS) could be removed on budget night.

Smokers, drinker and luxury car owners

Superannuation aside, its smokers, drinkers and those with a taste for luxury cars that the government has already suggested could be hit with higher taxes on Budget night.

While the details will remain unclear until budget night, CEDA has recommended raising taxes on luxury cars, alcohol and tobacco by 15 or 20%, and a 10 cents per litre boost to petrol tax.

Anti-detriment payment

Also expected to be axed is an anti-detriment payment –a refund of the 15% contributions tax paid by the deceased during the accumulation phase and is added to the super nest egg returned as a death benefit to the deceased's beneficiaries – which costs the federal budget about $100 million a year.

Combating bracket creep

Designed to combat bracket creep, the government is also planning a small increase to the $80,001 income threshold (to $85,001) over which earnings are taxed at 37¢ in the dollar. However, there's some speculation that the government could lift the threshold from $80,001 to $100,001 in one leap.