Australian Financial Review
19 August 2016
Superannuation funds, including self-managed super funds and their advisers, welcomed Treasurer Scott Morrison’s proposed backdown on one of the most controversial super measures contained in the May budget, but say they don’t go far enough.
The SMSF Association said it would welcome either raising the planned lifetime ceiling on after-tax super contributions to $750,000 from $500,000, or bringing forward the start date until budget night.
“We would like to see an increase in flexibility around the non-concessional caps, whether it be raising the cap, introducing carve-outs or bringing forward the start date,” said SMSF Association chief Andrea Slattery.
In May Mr Morrison said the after-tax contributions ceiling would be backdated until 2007.
In addition to raising the after-tax contribution limit or moving the start date, the Turnbull government has said it will allow savers to exceed the ceiling for certain “life events”, such as divorce settlements.
Ms Slattery said that the super package would need to be looked at in its entirety, adding that she had concerns over the granting of carve-outs for certain windfall payments on the grounds that they could make the super system more complex to administer. Ms Slattery suggested that raising the proposed annual $25,000 before-tax contribution limit, particularly for savers over the age of 50, was a more important issue.
However shadow treasurer Chris Bowen said the super backdown was an example of government dysfunction along with the “rolling fiasco” of the census, and the fighting retreat over banks.
“Malcolm Turnbull and Scott Morrison told us before the election they would stand by every word of the superannuation policy,” he said. “Today we see leaks out of the government on the front page of the Financial Review that the government is preparing to walk away from its $500,000 dollar cap on superannuation.”
Labor said it was disingenuous for the government to spend this week demanding the Opposition honour the spending cuts it pledged to back during the election campaign when the government was diluting its own savings proposals on super.
“(Mr Morrison) should be on the front foot and tell people, the superannuants of Australia, those who have invested in good faith under existing rules just what his policy is,” he said.
“We were told just a few weeks ago that the government would be ready and on the front foot before Parliament. Well, Parliament meets the week after next, and now we read, no, the legislation won’t be ready for some time.”
Welcoming the Coalition’s “consultative approach”, the Association of Superannuation Funds of Australia said the government’s proposed $25,000 annual non-concessional limit needed re-thinking. The new limit is considerably lower than the current annual contributions limits of either $30,000 or $35,000 depending on a member’s age.
“ASFA has consistently supported the broad thrust of the budget changes as we believe they make the system more equitable and sustainable, but has indicated that further consideration and analysis needs to be applied, particularly to the proposed reduction in annual concessional caps,” an ASFA spokesperson said.
“The concessional caps affect all Australians and affect their ability to achieve adequacy and that’s why it is important,” Ms Slattery said.
The SMSF Owners’ Alliance welcomed a move to raise the lifetime ceiling from $500,000, but argued that Australians should be allowed to contribute to their super accounts until they hit the proposed $1.6 million super pension transfer limit, another contentious measure unveiled in the May budget.
SMSF Owners’ Alliance chairman Bruce Foy said it was critical that retirees already drawing a private pension be allowed to retain all their savings in a tax-free pension and not have to move amounts above $1.6 million back into a so-called accumulation fund which attracts a 15 per cent earnings tax.
Mr Morrison has made it clear that he will stand by the policy of allowing retirees to transfer a maximum of $1.6 million into a tax-free private pension.
“The $1.6 million cap is a retrospective measure for people who have set assets aside. At the very least the $1.6 million cap should be raised. It should be grandfathered for people in the pension phase,” Mr Foy said.
The Financial Services Council said it welcomed the sign that the government was considering moving the start date for the introduction of the $500,000 lifetime contributions ceiling.
“Any measure that is backdated by almost a decade will have issues with implementation and with information retrieval, especially as superannuation is currently transitioning from a paper-based system to a digital system,” said Sally Loane, chief executive of the FSC.
The Association of Superannuation Fund Trustees said the proposed $500,000 cap was an important equity measure.
“Treasury has importantly confirmed that the 2007 start date relates to calculations around individual cap limits going forward. It does not mean that anyone who may have already put in more than $500,000 in non-concessional contributions will have to withdraw amounts above the cap,” said David Haynes, AIST executive manager of policy.