Category: Media Releases

Superannuation excerpt from the Australian Conservatives’ Policies

 Our Policies

Our policies are framed by our principles and developed in consultation with Australian Conservatives members.

We will update policies as they are developed and announced, and our latest policy-based initiatives can be seen in our News section.


Lower, simpler, fairer taxes and deregulation

We will restore confidence and certainty in the superannuation system to ensure those who have worked hard to achieve financial self-sufficiency will not be disadvantaged by government decisions.

Source (click on link):

Super changes tipped to enter lower house next week

Tuesday, 01 November 2016

With Parliament expected to consider superannuation reforms as early as next week, one trustee lobby group has
urged the government to slow down the pace of its reforms and take time to carefully consider the legislation.
SMSF Owners’ Alliance (SMSFOA) executive director Duncan Fairweather says the draft legislation should be
referred to parliamentary committees for review.

Mr Fairweather said submissions should be taken from Australians whose retirement savings will be affected,
the associations that represent them and superannuation experts.
“The government’s consultation on the draft legislation released so far has been hasty with just a few working
days allowed for comments on three tranches of complex new law,” he said.

Mr Fairweather added that the legislation introduces a new definition for superannuation, new structural
concepts, new rules on contributions and new tax applications.

“They are the most significant changes to superannuation in a decade since the reforms Peter Costello made in
2006,” he said.

“They will have an impact not just on the 4 per cent the government says will be directly affected now, but on
many more who are in mid-career and aiming for a financially independent retirement.”

Mr Fairweather said the Senate especially needs to consider whether it is prepared to pass tax law with
retrospective effective when it has been reluctant to do so in the past.

“The changes take many pages of legislation to explain. There is a risk of unintended consequences if the
legislation is rushed,” he warned.

As well as giving Parliament the opportunity to give proper consideration to the new superannuation laws, the
government should consider extending the start date of the legislation.

“Superannuation fund trustees, including the trustees for half a million self-managed funds, face important
decisions. Their financial advisers, accountants, lawyers and auditors will have to quickly get across the detail of
the legislation. That’s not to mention the task of modifying systems that faces the major funds and the ATO,”

Mr Fairweather said.
We appreciate there will be a revenue cost if the start date is pushed back. However, it is important to make
sure the new law will be workable and that Australians are given reasonable time to understand what the law
means to them.

The $1.6 million transfer balance cap explained

By William Fettes (, Lawyer, DBA Lawyers, Bryce Figot (, Director, DBA Lawyers and Daniel Butler, Director, DBA Lawyers (


The Department of Treasury on 27 September 2016 released the second tranche of exposure draft legislation and explanatory material in relation to the Federal Government’s proposed superannuation reforms.

These materials provide long-awaited detail on the workings of the $1.6 million transfer balance cap measure. This article explains some key take-away points about this measure.

The transfer balance cap and transfer balance account

Broadly, the $1.6 million balance cap measure is a limit imposed on the total amount that a member can transfer into a tax-free pension phase account from 1 July 2017.

The general transfer balance cap is $1.6 million for the 2017-18 financial year subject to indexation (see below for further information on the indexation rules).

An individual’s personal transfer balance cap is linked to the general transfer balance cap. All fund members who are in receipt of a pension on 1 July 2017 will have a personal balance cap of $1.6 million established at that time. Otherwise, a fund member’s personal balance cap comes into existence when they first become entitled to a pension. An individual’s personal transfer balance cap is equal to the general balance cap for the relevant financial year in which their personal balance cap commenced.

Usage of personal cap space will be determined by the total value of superannuation assets supporting existing pension liabilities for a member on 1 July 2017, as well as the capital value of any pensions commenced or received by a member from 1 July 2017 onwards.

A member’s available cap capacity over time is subject to a system of debits and credits recorded in a ‘transfer balance account’, which is a kind of ledger whereby amounts transferred into pension phase are credited to the account and amounts commuted or rolled-over are debited from the account.

Earnings and capital growth on assets supporting pension liabilities are ignored when applying the personal transfer balance cap. Thus, a member’s personal balance cap may grow beyond the $1.6 million cap due to earnings and growth without resulting in an excess. As such, a taxpayer who allocates growth or higher yielding assets to their balance cap will generally be better off if their pension assets appreciate in value. However, note the limitations with regards to the segregation method discussed below.

Any amounts in excess of a member’s personal transfer balance cap can continue to be maintained in their accumulation account in the superannuation system. Thus, members with superannuation account balances greater than $1.6 million can maintain up to $1.6 million in pension phase and retain any additional balance in accumulation phase.

What counts as a credit?

The following items count as a credit towards an individual’s transfer balance account and thereby their personal transfer balance cap:

  • the value of all assets supporting pension liabilities in respect of a member on 30 June 2017;
  • the capital value of new pensions commenced from 1 July 2017;
  • the capital value of reversionary pensions at the time the individual becomes entitled to them (subject to modified balance cap rules for reversionary pensions to children); and
  • notional earnings that accrue on excess transfer balance amounts.

As can be seen from the above list, death benefit pensions count towards to the recipient’s personal transfer balance cap.

The inclusion of death benefit pensions as part of the reversionary beneficiary’s transfer balance cap is in accordance with DBA Lawyers’ prediction in our 1 August 2016 newsfeed article. This aspect will have a significant impact on the succession plans of all fund members who collectively with their spouse have more than $1.6 million in superannuation.

Fortunately, there is an important concession. An excess will only occur as a result of a death benefit pension six months from the date that the reversionary beneficiary becomes entitled to receive the pension. This means there is a grace period for reversionary beneficiaries to commute their pension interest(s) to stay within their personal transfer balance cap without triggering any excess. The exposure draft explanatory memorandum (‘EM’) explains the six month period as follows:

This gives the new beneficiary sufficient time to adjust their affairs following the death of a relative before any consequences – for example, a breach of their transfer balance cap – arise.

Typically, a surviving spouse suffers years of grieving following the loss of a spouse but only has a six month period to make a decision on a reversionary pension if that results in an excess of their personal transfer balance cap.

What counts as a debit?

A member’s transfer balance account is debited when they commute (partially or fully) the capital of a pension. When a commutation occurs, the debit entry to the transfer balance account is equal to the amount commuted. Accordingly, it is possible for an individual’s transfer balance account to have a negative balance if their debits exceed their credits. For example, a full commutation of a pension where the assets supporting that pension have grown from $1.6 million to $1.7 million will result in a transfer balance account of negative $100,000.

Ordinary pension payments do not count as debit entries for the purposes of the transfer balance account. Proposed legislative amendments will ensure that partial commutations do not count towards prescribed minimum pension payments. This proposal may also impact a member with an account-based pension electing to convert an amount to a lump sum for claiming their low rate cap.

In addition to the above recognised debits, relief will be available in relation to certain events where an individual loses some or all of the value of assets that are held in pension phase. The proposed relief concerns family law payment splits, fraud and void transactions under the Bankruptcy Act 1966 (Cth). In these circumstances, an individual will be able to apply to the ATO for relief so that their transfer balance account can be debited to restore their personal transfer balance cap, eg, if a member is defrauded of their super savings and the perpetrator is convicted, then a debit (or restoration) can be made to their transfer balance account.

At this stage, there is no relief proposed in relation to a major economic downturn eroding the value of fund assets held in pension phase. Therefore, if another global financial crisis were to occur, any adverse economic effects on the assets supporting pensions could substantially impair a member’s personal transfer balance cap.

Excess personal transfer balance cap

Individuals who exceed their personal transfer balance cap will have their superannuation income streams commuted (in full or in part) back into accumulation phase and notional earnings (see below) on the excess will be subject to an excess transfer balance tax.

Notional earnings accrue on excess transfer balances based on the general interest charge. Notional earnings accrue daily until the breach is rectified and are generally credited towards an individual’s transfer balance account (subject to a transfer balance determination being made by the Commissioner).

The draft EM provides the following example of an excess transfer balance (refer to example 1.14):

On 1 July 2017, Rebecca commences a superannuation income stream of $1 million from the superannuation fund her employer contributed to (Master Superannuation Fund). On 1 October 2017, Rebecca also commences a $1 million superannuation income stream in her SMSF, Bec’s Super Fund.

On 1 July 2017, Rebecca’s transfer balance account is $1 million. On 1 October 2017, Rebecca’s transfer balance is credited with a further $1 million bringing her transfer balance account to $2 million. This means that Rebecca has an excess transfer balance of $400,000.

On 15 October 2017, the Commissioner issues an excess transfer balance determination to Rebecca setting out a crystallised reduction amount of $401,414 (excess of $400,000 plus 14 days of notional earnings). Included with the determination is a default commutation authority which lets Rebecca know that if she does not make an election within 60 days of the determination date the Commissioner will issue a commutation authority to Bec’s Super Fund requiring the trustee to commute her $1 million superannuation income stream by $401,414.

As can be seen from the above example, there is some flexibility built into the system for proactive rectification where an excess transfer balance occurs.

An excess transfer balance tax is payable on the accrued notional earnings of the excess amount to neutralise any benefit received from having excess capital in the tax-free retirement phase. The excess transfer balance tax is assessed for the financial year in which a member breaches their transfer balance cap. The excess transfer balance tax is 15% on notional earnings for the first breach and 30% for second and subsequent breaches.

Indexation of the balance cap

The transfer balance cap is indexed in increments of $100,000 on an annual basis in line with the Consumer Price Index.

A person’s eligibility to receive indexation increases in relation to their personal transfer balance cap is subject to a proportioning formula based on the highest balance of the member’s transfer balance account compared to the member’s personal balance cap.

The proportioning formula as applied to an example increase of $100,000 is as follows:

(Personal transfer balance cap – highest transfer balance) x $100,000
Personal transfer balance cap


An example of how the proportioning formula applies in practice is set out below.


John commences a pension with an account balance of $800,000 in FY2017-18. At that time, he has used 50% of his $1.6 million personal transfer balance cap.

If the general transfer balance cap is indexed to $1.7 million in 2019-20, John’s personal transfer balance cap is increased by $50,000 because he is only eligible to take 50% of the $100,000 increase. Accordingly, John can now commence a pension with capital of $850,000 without breaching his personal transfer balance cap.

The above answer does not change if John partially commutes his pension prior to the indexation increase, as the formula is based on John’s highest transfer balance (ie, $800,000).

A member who has exhausted or exceeded their personal transfer balance cap will not be eligible for any cap indexation.

CGT relief

The draft legislation also provides CGT relief which broadly enables the cost base of assets reallocated from pension to accumulation phase to be refreshed to comply with the transfer balance cap or the new transition to retirement income stream arrangements. The draft EM states:

Complying superannuation funds will now be able to reset the cost base of assets that are reallocated from the retirement phase to the accumulation phase prior to 1 July 2017.

Where these assets are already partially supporting accounts in the accumulation phase, tax will be paid on this proportion of the capital gain made to 1 July 2017. This tax may be deferred until the asset is sold, for up to 10 years.

Segregated assets

Broadly, an SMSF trustee can elect to obtain CGT relief to reset the cost base of a segregated asset to its market value provided the asset ceases to be a segregated asset prior to 1 July 2017. The market value is determined ‘just before’ the time the asset ceased being a segregated current pension asset.

Typically, an asset would cease to be segregated by being transferred from pension to accumulation phase. However, it appears that an asset could also cease being segregated by being treated as an unsegregated asset (with an associated actuarial report).

It is important to note, however, that the segregation method will not be available to SMSFs and small APRA funds, with at least one member in pension mode who has a total superannuation fund balance of over $1.6 million (in all funds). This limits planning opportunities that may otherwise be available to SMSFs under the segregation method.

Unsegregated or proportionate assets

Broadly, where an asset is supporting a pension liability using the unsegregated or proportionate method, an SMSF trustee can elect to obtain CGT relief to reset the cost base of an asset to its market value on 1 July 2017 subject to the following requirements:

  • the fund must calculate a notional gain on the proportion of the asset that is effectively attributable to the accumulation phase as at 30 June 2017;
  • if not deferred, the fund must add this notional gain to its net capital gain (or loss) for FY2017 which effectively crystallises the tax liability that would have arisen if that asset had been sold in FY2017;
  • however, an SMSF trustee can elect to defer the notional gain for up to 10 years (ie, up to 1 July 2027) unless a realisation event occurs earlier than 1 July 2027; and
  • if a realisation event does not occur by 1 July 2027, the cost base of the relevant asset will revert to its original cost base.

If the relevant asset is sold before 1 July 2027, the deferred notional gain is added to any further net capital gain (or adjusted against any net capital loss) made on a realisation event such as the ultimate sale of that asset. This further notional gain is calculated based on the higher cost base determined as at 30 June 2017 (being the market value of that asset at 30 June 2017 with any further adjustments to that asset’s cost base since 30 June 2017).

Thus, an SMSF trustee may elect to reset the cost base of an asset. This election may be applied on an asset by asset basis as some may prefer not to reset the cost base of all eligible assets to market value, eg, a particular asset’s market value may be lower than its cost base and a cost base reset in that context could result in a greater future capital gain. Further, this election can be made in the SMSF’s FY2017 annual return and does not need to be made prior to 1 July 2017 (as is the case for a CGT reset for a segregated asset as discussed above).

The net capital gain attributable to the accumulation interest that is not exempt under the exempt current pension income provisions is taxed at 15% subject to the 1/3 CGT discount available for assets held for more than 12 months. Refer to examples 1.45, 1.46 and 1.47 in the draft EM.

Although the prospect of resetting the cost base of current pension assets may be attractive in the lead up to 1 July 2017, paragraph 1.226 of the draft EM reminds SMSF trustees not to overlook the general anti-avoidance provisions in part IVA of the Income Tax Assessment Act 1936 (Cth). This paragraph of the EM states:

The CGT relief arrangements are only intended to support movements of assets and balances necessary to support the transfer balance cap and changes to the TRIS. It would be otherwise inappropriate for a fund to wash assets to obtain CGT relief or to use the relief to reduce the income tax payable on existing assets supporting the accumulation phase. Schemes designed to maximise an entity’s CGT relief or to minimise the CGT gains of existing assets in accumulation phase may be subject to the general anti-avoidance rules in Part IVA …

Naturally, the impact of the CGT reset provisions will need to be carefully considered as there are numerous strategies that will unfold under the draft proposals.


The proposed $1.6 million transfer balance cap measure involves substantial changes to Australia’s superannuation system, especially the tracking of each member’s personal balance cap. The balance cap proposal will reduce the tax effectiveness of pensions due to the new cap and have a major impact on succession planning strategies giving rise to substantially more tax payable overall in respect of death.

In particular, many couples will not like the fact that their deceased spouse’s reversionary pension gets ‘retested’ to a surviving spouse where the surviving spouse is subject to only their own $1.6 million personal balance cap. The Government has seen that raising extra tax revenue is preferred rather than allowing a deceased spouse’s pension that would have already been tested within their personal transfer balance cap to revert to a surviving spouse. We see this as a major issue that is likely to arise in submissions.

Note that the above commentary is a general summary only based on exposure draft legislation and explanatory material that is subject to change. For full details, see

Related articles

*           *           *

This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.

Note: DBA Lawyers hold SMSF CPD training at venues all around. For more details or to register, visit or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit


4 October 2016

Institute of Public Affairs’ submission to Treasury – lodged 16 September 2016

From the desk of Brett Hogan, Director of Researchipalogo

16th September 2016

Superannuation Tax Reform
Retirement Income Policy Division
The Treasury
Langton Crescent


Dear Sir / Madam.
On behalf of the Institute of Public Affairs, please find enclosed this submission on the
Exposure Draft of the Australian Government’s:

  • Superannuation (Objective) Bill 2016;
  • Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016; and
  • Treasury Laws Amendment (Fair and Sustainable Superannuation) Regulation 2016.

Given the limited time available for consultation, this submission will take the form of a letter
and concentrate on the proposed new objective of the superannuation system.

1. Introduction and Budgetary Context
Superannuation lies at the heart of important national policy questions about taxes, spending,
personal responsibility and the role of government.

Almost a quarter of a century after the introduction of compulsory superannuation, four out
of five Australians do not have enough savings to fully fund their retirement.

Yet rather than identify new ways to encourage all Australians to put more money into their
retirement accounts, the bipartisan approach of national policy makers is to treat the $2
trillion worth of private superannuation funds as just another source of taxation revenue.

The Institute of Public Affairs considers that for all the talk of ‘fairness’ and desire to rein in
so-called ‘tax concessions,’ it is out-of-control government spending and the desire to
increase taxation revenue that is driving these changes.

Australian Government spending has increased 1 from $271 billion per year in 2007-08 or
23.1% of Gross Domestic Product (GDP), to $445 billion in 2016-17 or 25.8% of GDP.

1 Australian Government, Budget Paper No.1:Budget Strategy and Outlook 2016-17, p 10-5

In 2019-20, spending is expected to pass $500 billion for the first time. So while it took 107
years for federal government spending to reach $271 billion it will take only another twelve
years to reach $500 billion and according to trend a total of only fourteen years to double it to
$542 billion.

Additionally, sometime shortly after 30 June 2017, Australian Government Gross Debt is
expected to pass $500 billion for the first time. Gross debt on 30 June 2007 was only $53.2
billion. 2

The Government should not seek to resolve these imbalances by raising taxes to ‘chase
spending,’ as former Treasurer Peter Costello was recently quoted as saying. 3

2. Recent Proposed Changes
On Budget Night, 3 May 2016, the Australian Government announced a swathe of new
changes to the taxation and regulatory treatment of superannuation, designed to raise $2.9
billion net over four years.

While most of these changes are not the subject of this consultation, the Institute of Public
Affairs would like to formally put on the public record its opposition to:

  • reducing the threshold for the 30% contributions tax from $300,000 per year to
    $250,000 per year;
  • reducing the pre-tax contributions limits from $30,000 and $35,000 to $25,000 per
  • limiting the amount of money that can be transferred into a retirement account to $1.6
    million; and
  • introducing a new $500,000 lifetime post-tax contributions limit backdated to 2007
    (subsequently replaced on 15 September 2016 with a $100,000 per year limit).

Restrictions on the amount of money that can be transferred into, or remain within, retirement
accounts, undermine the ability of the system to provide comfortable retirement incomes.

3. Primary Objective of Superannuation
In his Budget Speech on 3 May, the Treasurer said that “becoming financially independent in
retirement, free of welfare support, is one of life’s great challenges and achievements.” 4

The Institute of Public Affairs wholeheartedly agrees.

However, notwithstanding this philosophically sound statement, the Treasurer that evening
issued a joint Media Release with then Assistant Treasurer Kelly O’Dwyer to announce that

2 Ibid. p 10-13 3 The Australian, “Peter Costello’s Blast: Liberal Party Lacks Clear Vision,” 10 September 2016,, Viewed 16 September 2016
4 Hon. Scott Morrison MP, 2016 Budget Speech,,
Viewed 16 September 2016

the Government would “enshrine in law that the objective for superannuation is to provide
income in retirement to substitute or supplement the Age Pension.” 5

Tellingly, this Release also noted that the proposed objective “has been an important anchor
for the development of the superannuation changes included in the Budget.”

According to sections 4 and 5 of the Exposure Draft 6 of the Superannuation (Objective) Bill
2016, in fact the Government is proposing that this is now to be the ‘primary objective’ of the
superannuation system.

Section 6 states that any subsequent legislation relating to superannuation that is introduced
to Parliament must include “an assessment of whether the Bill is compatible with the primary
objective of the superannuation system.”

Contained within the Exposure Draft Explanatory Materials 7 for the two Draft Bills is a set
of five proposed so-called ‘subsidiary objectives,’ which are worth highlighting:

  • facilitate consumption smoothing over the course of an individual’s life;
  • manage risks in retirement;
  • be invested in the best interests of superannuation fund members;
  • alleviate fiscal pressures on government from the retirement system; and
  • be simple, efficient and provide safeguards.

While the Government appears to have adopted the primary and subsidiary objectives from
the Final Report of the 2014 Financial System Inquiry (FSI),8 it is noteworthy that the FSI
actually made six subsidiary objective recommendations, with the Government choosing to
leave out that the system:

  • be fully funded from savings.

In referring to this objective in its Final Report, the FSI said that:

“A fully funded system, as opposed to an unfunded system, is important for sustainability and
stability. The system is designed to be predominantly funded by savings from working life
income and investment earnings, where superannuation fund members in general have claims
on all assets in the fund.”

Concepts such as facilitating consumption smoothing, investing in the best interests of
members and managing risks in retirement, let alone that the system be fully funded from
savings, actually make a lot more sense than the proposed primary objective ‘to substitute or
supplement the Age Pension.’

5 Hon. Scott Morrison MP & Hon. Kelly O’Dwyer MP Joint Media Release, “A More Sustainable Superannuation System,”
3 May 2016,, Viewed 16 September 2016
6 Superannuation (Objective) Bill 2016 Exposure Draft,,
Viewed 16 September 2016
7 Exposure Draft Explanatory Materials,, Viewed 16 September 2016
8 Commonwealth of Australia, Financial System Inquiry Final Report, November 2014,, Viewed 16 September 2016

Yet it is the proposed primary objective that will be reference point for the superannuation
system, and against which all subsequent proposals for change will be judged.

It is of the gravest concern that maximising personal income in retirement is not deemed to be
the primary, or even a subsidiary, objective of the system.

The OECD has found 9 that the net pension replacement rate for average income earners in
Australia is only 58 per cent (53.4 per cent for women) when the generally accepted benchmark is 70 or 80 per cent.

Australia’s 2014 National Commission of Audit reported that 10 the proportion of retirees on
a full or part pension was expected to remain at around 80 per cent over the next three

According to the Government’s own Budget Papers, 11 the cost of ‘Income Support for
Seniors’ was $43.2 billion in 2015-16 and is projected to reach $51.8 billion just four years

Superannuation initiatives that are implemented under the auspices of the proposed primary
objective are unlikely to help middle-income earners to significantly boost their income in
retirement or to allow large numbers of Australians to move off the full or part Age Pension.

Instead of proposing that the goal of the superannuation system is merely to take the place of
or top up the Age Pension, the aim should be to maximise the retirement incomes of all
Australians, and reduce dependence on welfare payments.

To this end, the Institute of Public Affairs would like to offer an alternative Primary
Objective for the superannuation system:

“The objective of the superannuation system is to ensure that as many Australians as
possible take personal responsibility for funding their own retirement. The Age Pension
provides a safety net for those who are unable to provide for themselves in retirement.”

The Institute of Public Affairs is happy to support the adoption of all six of the FSI’s
subsidiary objectives, if the primary objective is so amended.

Given that a bad objective is worse than no objective at all, the second-best option would be
to make no change.

9 Organisation for Economic Co-operation and Development, Pensions at a Glance 2015,, Viewed 16 September 2016
10 Australian Government, National Commission of Audit 2014, Chapter 7.1: Age Pension,, Viewed 16 September 2016
11 Australian Government, Budget Paper No.1:Budget Strategy and Outlook 2016-17, p 5-26

4. Timing of this Consultation
It is disappointing that the Government has allowed only nine days between the release of the
draft legislation (Wednesday 7 September) and the close of submissions (Friday 16

We note that the formal consultation period on proposed changes to the Working Holiday
Maker Visa Scheme (also known as the Backpacker Tax) ran from mid-August to mid-
September, which would have assisted that review to receive over 1,700 submissions. 12

Considering the important retirement incomes, taxation, welfare and social policy issues that
are involved here, a longer period would have resulted in additional, and more detailed,

5. Segregating Consultation on the Objectives from Substantive Proposals
We also question segregating public consultation on the proposed new superannuation system
objective from the arguably more contentious tax increases and contributions limits.

While we understand that the discussions that had been taking place within the Liberal and
National Parties may have delayed formal public consultation on the substantive proposals,
given that the whole package was developed and initially announced at the same time, the
Government should have delayed consultation on the objective as well.

6. Future Changes
If the objective of the nation’s superannuation system is merely to provide income in
retirement to substitute or supplement the Age Pension, then the taxation and regulatory
proposals announced in the 2016 Budget and amended on 15 September are only the beginning.

Once the principle has been established that superannuation taxes can be increased to pay for
government spending, that all major parties have voted for it, and that it doesn’t even
contradict the objectives of the system, then there will be no stopping future governments.

Kind regards,
Brett Hogan
Director of Research

12 Australian Government, Department of Agriculture and Water Resources website, “Working Holiday Maker Visa Review,”, Viewed 16 September 2016

Treasurer sees sense on non-concessional super cap

logosoa15 September 2016

The Treasurer’s decision to scrap the $500,000 lifetime non-concessional cap is sensible.

In our view it was never necessary in the first place.

If an upper limit is set on tax-free superannuation accounts it shouldn’t matter how and when the limit is reached.

So the new, reduced non-concessional cap of $100,000 a year is also unnecessary. If an overall account balance cap is set then annual concessional contribution limits are not needed. Conversely, with contribution limits in place (the new cap on non-concessional contributions and the reduced concessional cap) there’s no need to have an overall $1.6 million retirement account balance cap at all. Having both contribution and balance caps adds unnecessary complexity to a system for which simplicity is one of the government’s stated objectives.

However, scrapping the retrospective lifetime $500,000 cap on non-concessional contributions will remove a headache for many people whose retirement savings plans were disrupted by the budget announcement. They will now be able to plan ahead with more confidence.

It is unfortunate that it comes at the cost of withdrawing the budget measures to harmonise contribution rules for people aged 65 to 74, including getting rid of the work test.

The Treasurer’s decision comes after widespread expressions of concern from self-managed fund members, many of whom have been in touch with Coalition members and senators, and representations from SMSF Owners and others.

The scrapping of a major plank of the superannuation changes announced in the May budget confirms our view that the changes were not well thought through at the time. They were driven by revenue needs rather than what is best for the superannuation system.

There are still many unanswered questions about how the $1.6 million cap will work in practice and it may be several weeks before the Government releases further draft legislation that will hopefully answer such questions.

If a cap on tax-free account balances is thought necessary at all, the limit should be doubled.

Research undertaken by Professor Ron Bewley, former head of the School of Economics at UNSW, concludes that an upper limit of $3.2m is necessary to provide an income sufficient to last throughout retirement.


Changes to superannuation have far-reaching and long lasting effects on people and should only be contemplated after extensive consultation. The truncation of the Tax White Paper process, the rushed consultation on the objective of superannuation, the unexpected budget changes and this latest announcement fell short of the principles of good policy making on superannuation which for most Australians is their most significant investment outside the family home and the key to a comfortable retirement.

SMSFOA Contact:
Duncan Fairweather
Executive Director
SMSF Owners’ Alliance
0412 256 200

Superannuation changes will condemn middle class to the pension

 ipalogoMedia Release

Simon Breheny and Brett Hogan

The Turnbull Government’s proposed superannuation changes will condemn middle-income Australians to the Age Pension, according to a research paper released today by free market think tank the Institute of Public Affairs.

The paper, Strangling the Goose with the Golden Egg – Why We Need to Cut Superannuation Taxes on Middle Australia, which was written by Rebecca Weisser in collaboration with Henry Ergas, highlights how the government’s desperation for new sources of revenue to fund its spending habits is undermining the integrity of Australia’s retirement incomes system.

“Currently, middle class Australians can only expect income in retirement equal to 58% of their pre-retirement earnings, compared to nearly 90% for low income earners,” said Mr Simon Breheny, Director of Policy at the Institute of Public Affairs.

“The poor have the pension, the rich have alternative investments and the middle class will miss out again. The objective of the superannuation system should be for people to maintain their living standards in retirement, not imply that they should be grateful to be tied to the Age Pension,” Mr Breheny said.

The paper’s recommendations include moving to abolish taxes on contributions and earnings and instead taxing end-benefits in retirement at an individual’s marginal income tax rate, prioritising the reduction of fees and charges, and facilitating the purchase of private, defined benefit pensions for those who wish to purchase them.

“The compulsory superannuation guarantee will not help, given that the proportion of retirees on a full or part pension will remain at around 80 per cent over the next three decades according to the recent National Commission of Audit,” said Brett Hogan, Director of Research at the Institute of Public Affairs.

“Instead of citing ‘fairness’ to criticise people who attempt to provide for themselves, policy makers should acknowledge that private funds put aside for retirement represent deferred consumption, so flat and low superannuation taxes on contributions and earnings for everyone is actually good public policy,” Mr Hogan said.

A copy of Strangling the Goose with the Golden Egg is available here.

For media and comment: Simon Breheny, Director of Policy, Institute of Public Affairs, on 0400 967 382, or at, or Rebecca Weisser on 0438 645 562, or Henry Ergas on 0419 239 710.

For media coordination, please contact Evan Mulholland, IPA Media and Communications Manager, on 0405 140 780, or at

How to destroy superannuation – just ask Grattan

Last November 2015, the SMSF Owners’ Alliance, put out a media release regarding the Grattan Institute’s attitude to superannuation. In view of Grace Collier’s article in the Weekend Australian (20-21 August 2016, page 22) “Leftie think tank behind super grab – Why should Coalition policy be based on the Grattan Institute’s recommendations?”, Save Our Super thinks it is timely to revisit the SMSF Owners’ Alliance media release.

25 November 2015


An $11,000 cap on concessional contributions, as proposed by the Grattan lnstitute, would confine superannuation to being merely a substitute for the age pension rather than a vehicle for increasing savings for individuals and the nation.
This narrow approach defeats the purpose of superannuation. lf people can only save enough for retirement to be a bit better off than the pension then, rationally, they will spend their retirement savings as fast as they can and go on the pension. Where is the incentive to save more and be financially independent?
This is not the way to grow Australia’s retirement savings and give everyone the chance to live comfortably at a level related to their pre-retirement income, a concept known to economists as the ‘reasonable replacement rate’. This is generally accepted to be around two-thirds of pre-retirement income.

Grattan’s plan would throttle retirement savings and condemn millions of Australians to spend the last years of their lives in genteel poverty. Grattan quotes ASFA’s estimate that a retired couple need super savings of $640,000 for an “affluent lifestyle”. At a 5% return, that would give couples an income of $32,000 – hardly affluent.
It doesn’t allow for unexpected costs, such as surgery, house repairs or other necessities, that will run down fund balances. Nor does it allow for the likely high costs of care at the end of life which will have to be met by the taxpayer if people can’t afford to pay for themselves from their retirement savings.

As the Financial System Inquiry (FSl) noted, the biggest fear older people have is that their savings will not last all their lives. We suspect that Grattan really doesn’t like the idea of superannuation at all and would prefer everyone to be on the taxpayer funded age pension. Remember that when Labor announced their policy to tax super earnings above $75,000, Grattan said the limit should be $20,000 – about the same as the age pension. So in their view any income from savings above the age pension level should be taxed.

Superannuation is not a welfare system. lt is a retirement savings system that delivers important social and economic benefits to the nation. Grattan doesn’t see this distinction and seems to regard superannuation as a social engineering tool like the welfare system.
lf Grattan gets their way, Australia’s savings pool will be drained. There will be less money going into superannuation, less investment and fewer jobs – not least in the superannuation ‘industry’ itself. The corporations that back Grattan should think about this.

The Grattan Report repeats a couple of well-worn fallacies.
First, that the majority of superannuation tax concessions go to high income earners. Yes, they do, but high income earners pay proportionally more in income tax than they receive in concessions.
Grattan, and others, should acknowledge that higher income earners pay more tax. The Government’s ‘Better Tax’ website points out that the one third of taxpayers on incomes above $80,000 pay two thirds of income tax while the two thirds of taxpayers on incomes below $80,000 pay one third. ATO stats show that the top 20% of income earners pay 64% of income tax collected.

Second, Grattan comes up with a $25 billion cost to the budget of superannuation tax concessions. At least this is different to the usual $32 billion claim and moving in the right direction but it is just as flaky. As the Parliamentary Tax & Revenue Committee has been hearing, these numbers are not valid and even Treasury doesn’t stand by them.

Besides, mismanagement of the budget is not a reason to cut back on incentives for retirement savings. Governments need to get their real spending under control.

SMSF Owners believe the superannuation system is generally working well but can be improved. One way is to change the taxation of contributions. lnstead of everyone paying the same flat tax on contributions, there should be a flat (equal) tax benefit for everyone in the form of a rebate for super contributions keyed off an individual’s marginal income tax rate. This is the concept advanced in the Henry tax review five years ago, supported in principle by SMSF Owners in our Tax White Paper submissions and recently advocated by Deloitte Access Economics.

On our proposal, adjusting the front end taxation of contributions would allow the removal of taxes on fund earnings without affecting government revenue and boost tax-free retirement incomes so Australians can afford a comfortable and care free retirement. This would inspire Australians to save as much as they can, not as much as Grattan thinks they should.

lf there are to be changes made to the taxation of superannuation then they should be considered in the context of the whole tax system, including Australia’s highly progressive income tax rates. This is the outcome we are expecting from the current White Paper process which should deliver lower, simpler and fairer taxes for everyone.

Duncan Fairweather
Executive Director

SMSF Owners


IPA Media Release Logo

Institute of Public Affairs | Australia’s leading free market think tank

12 July 2016 (sic)


The Turnbull government should cut government spending or delay the introduction of its proposed company tax cuts instead of increasing taxes on superannuation says Dr Mikayla Novak, Senior Research Fellow at free market think tank the Institute of Public Affairs.
Dr Novak was responding to media reports that the Turnbull government was considering modifying its controversial superannuation tax increases.

“The superannuation tax increases are projected to raise a net total of $2.9 billion over the next four years.

There are many alternative ways of financing this amount, including:

  1. Means-testing the child-care rebate and tightening eligibility for Family Tax Benefit Part B
  2. Reducing expenditure across all government departments by one-fifth of one percent
  3. Delaying the company tax cut by 3 years and reducing corporate welfare spending”


2016-17 $m 2017-18 $m 2018-19 $m 2019-20 $m Total $m
Middle-class welfare reforms
Means-test Child Care Rebate 250 250 250 250 1,000
Tighten eligibility for FTB B 500 500 500 500 2,000
Reduce cost of government by 0.2% 723 739 776 804 3,042
Other measures
Delay company tax cut by 3 years 400 500 800 1,700
Reduce corporate welfare spending 427 317 237 208 1,189

Some of these proposals were outlined in Dr Novak’s research paper ‘Making Welfare Sustainable-Targeting welfare to those who need it most’  published in November last year.

“Company tax cuts should not be paid for by increasing taxes on retirement income.”

“The superannuation changes announced in the 2016 Budget do more to damage confidence in the
retirement income system than they are worth in dollar value.”

“The government is right to be concerned about its credit rating, but the most important step in the path to budget repair is to get control of spending, ” Dr Novak said.

For media and comment:
Mikayla Novak, Senior Research Fellow, Institute of Public Affairs, or 0448 276 376.

Hate to say it Malcolm, but we told you so

logosoa3 July 2016

The rebuke delivered by voters to the Coalition yesterday came as no surprise to one group of


Ever since the May budget introduced a new tax and retrospective limits on superannuation

savings, SMSF Owners and many thousands of individuals have been warning the Government it

is going the wrong way on superannuation.

This was expressed in our regular briefs to Coalition members before and during the campaign, in

letters from members of SMSF Owners to Coalition members, senators and candidates and in

thousands of social media comments. While the superannuation changes were not a headline

issue in most of the media during the campaign, we know that Coalition members were under a lot

of pressure in their electorates.

Many Liberal voters felt betrayed that a party supporting individual effort and self-reliance should

impose a new tax on retirement savings. This sentiment came not just from those in retirement

who would be affected directly by the tax now, but also from those in middle-age who aspire to be

financially independent in retirement.

It was extraordinary for a Coalition Government that argues for lower taxes and lower government

to introduce a brand new tax on superannuation earnings for retirees. There has never been such

a tax since superannuation was first introduced with the progressive income tax system over 100

years ago.

It was baffling that the Government attempted to argue that a new cap on contributions back-dated

by 9 years was not retrospective. It clearly was and already the Government has had to modify its

policy to take account of unintended consequences.

During the campaign and again on election night, the Prime Minister argued for stability in

government to deal with economic and political turbulence created by Brexit and other global

factors. It is no time to be fiddling with superannuation and undermining confidence in it.

On last night’s known voting figures it appears the Coalition will either just scrape back into

government on its own account or it may have to rely on independents to form a minority


Either way, one of the first things the Prime Minister should do on his likely return to office is order

a re-think on superannuation policy and engage in genuine consultation with the superannuation

sector, including SMSFs, on a better way forward.

If changes to superannuation are considered necessary they should be made in a way that does

not reduce the value of savings that were made under the rules that existed before the May budget

or reduce the opportunity for people to make non-concessional contributions.

Changes to superannuation should be prospective, not retrospective and retirement savings made

before the May budget should be grand-fathered from the budget measures. This applies, in

particular, to the lifetime cap on non-concessional contributions.

Instead of imposing a new tax and contribution limits, the Government should be expanding the

parameters of superannuation and encouraging more retirement savings so more people can be

financially independent in retirement and not have to rely on the next generation of taxpayers to

support them.


Duncan Fairweather.

Executive Director. 0412 256 200

SMSF Owners’ Alliance

Letter from Scott Morrison to SMSFOA




Parliament House Canberra ACT 2600 Australia

Telephone: 61 2 6277 7340 | Facsimile: 61 2 6273 3420

Mr Duncan Fairweather

Executive Director
SMSF Owners’ Alliance Limited

Via email:

Dear Mr Fairweather
I write to clarify the scope of the Turnbull Government’s superannuation reforms announced in the 2016-17 Budget.
As you are aware, the 2016-17 Budget announced the introduction of a lifetime non-concessional contributions cap of $500,000, applicable from 7:30pm (AEST) on 3 May 2016 (Commencement Date).

The Government has been asked to provide guidance on how this measure will apply to a very small number of individuals using sophisticated financing techniques for the purchase of assets within a self-managed superannuation fund (SMSF).

Specifically, the Government has been asked for guidance on the consequences for individuals in the following circumstances:

• The trustee of the individual’s SMSF has entered into a contract for the purchase of an asset (often using a limited recourse borrowing arrangement (LRBA)) prior to the Commencement Date (Pre-Existing Contract);

• The Pre-Existing Contract is due to be completed after the Commencement Date;

• The individual was above the lifetime non-concessional cap as of the Commencement Date or would be above the lifetime non-concessional cap as a result of further non-concessional contributions made in respect of the completion of the Pre-Existing Contract; and

• The individual had planned to complete the contract of sale by making further non-concessional contributions after the Commencement Date.

In such circumstances, transitional provisions will apply to allow further non-concessional contributions to be made only to the extent necessary to complete the Pre-Existing Contract, taking into account existing financing arrangements. The quantum of the additional contributions must also be within the constraints of the non-concessional contributions cap rules that existed immediately prior to the Commencement Date. These additional non-concessional contributions will be counted towards the lifetime non-concessional cap, but will not result in an individual being in breach of the lifetime non-concessional cap.

In addition, transitional arrangements will apply to SMSFs with existing borrowings, including LRBAs. Members of SMSFs with existing borrowings will be permitted to make further non-concessional contributions to the extent necessary to ensure the legal obligations of SMSFs that existed on or before the Commencement Date are met or to comply with the Australian Taxation Office (ATO) Practice Compliance Guideline 2016/5 (PCG 2016/5). These additional non-concessional contributions will be counted towards the lifetime non-concessional cap, but will not result in a breach of the lifetime non-concessional cap, until 31 January 2017. Once legislated, this deadline will be extended only in exceptional circumstances and at the discretion of the Commissioner of Taxation.

This transitional period allows those with no other practical option than to make further non-concessional contributions to meet legal obligations that existed at the Commencement Date or to comply with PCG 2016/5 sufficient time to rearrange their affairs such that they do not breach the cap as a result of contributions made after the Commencement Date.

The date of 31 January 2017 is consistent with the deadline set by the ATO in relation to PCG 2016/5, which provides safe harbour guidance for SMSFs who have borrowed from related parties under a LRBA.

I trust this information provides you and the very small number of individuals to whom the aforementioned proposed treatment applies the necessary certainty going forward.

Should you have any queries in relation to the contents of this letter, please do not hesitate to contact Byron Hodkinson, Senior Adviser, Office of the Treasurer on (02) 6277 7340.

Yours sincerely

The Hon Scott Morrison MP

29 June 2016

Load more