The Federal Government's removal of up-front deductions for nontimber managed investment schemes is a reminder that nothing in financial planning stays the same for long. The decision is sudden, with no grandfathering provisions, and affects all schemes without prior tax rulings.
According to our columnist Kevin Bailey, in the day following the announcement, more than $400 million was wiped off the largest of the agricultural schemes. Bailey suggests this figure supports the idea that the industry was artificially maintained at unrealistic levels based solely on tax incentives.
However, Treasury's changes are a reminder that any rules can be changed by higher powers and often are. Last year, the superannuation system was tampered with, but because the changes were for the good of most investors there was no outcry. The changes, however, do not inspire a great deal of trust in the Government. The fact it can make changes and often does override rules that people currently abide with makes it seem frivolous to trust it with something as long-term as superannuation.
What will the rules be 20 or 30 years from now? There is a constant push to involve younger people in investing for their retirement, but young people, especially gen Ys, are very sceptical of authority. Fund managers are spending money to involve younger generations from an earlier age but in my mind they are being thwarted by government meddling.
