Australian Financial Review
Home Personal Finance Superannuation & SMSFs Jul 14 2016 at 6:25 PM Updated Jul 14 2016 at 6:25 PM
by Sally Patten Joanna Mather
Concern is growing in the superannuation industry that the federal government’s plan to introduce a lifetime $500,000 ceiling on after-tax super contributions may be hard to administer, adding to the pressure on the government from the revolt against the change from some backbenchers.
The Australian Institute of Superannuation Trustees said that while it supported the “intention” behind a plan to introduce the ceiling, it harboured concerns about the ability of super funds to implement the policy and the backdating of the cap to 2007.
“AIST is supportive of the intention behind the $500,000 cap but [we] do have concerns particularly around timelines and cost of implementation for funds,” a spokesperson said. The AIST said that replacing the lifetime cap with an annual $50,000 non-concessional contributions limit would be easier to administer.
“It’s easier to monitor the status of contributions made over the course of a year to a member’s fund, than over a lifetime,” the AIST spokesperson said. The lobby group representing not-for-profit schemes added that lowering the pre-tax contributions limit to $25,000, another key measure of the May budget, would hurt older savers.
The Financial Services Council, which represents bank-controlled super funds, also raised concerns over the implementation of the $500,000 lifetime cap.
“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,” FSC chief Sally Loane told The Australian Financial Review.
On Monday Ian Silk, chief executive of the $100 million AustralianSuper retirement fund, said the $500,000 cap was retrospective “to a degree” and predicted the government would come under pressure from its own backbenchers to modify the measure. Mr Silk, like many in the industry is supporting a $1.6 million on tax-free super pension transfers and the proposed tax offset for low income earners.
The Association of Superannuation Funds of Australia said it supported the $500,000 lifetime cap, adding that the start date was “a matter for the government”.
Industry Super Australia, which represents large industry super schemes, said it supported lifetime limit, as well as the start date.
“If the objective is to ensure the super settings deliver better sustainability, you do need a mechanism so that people don’t take advantage of a transition time to boost non-concessional contributions,” said ISA deputy chief executive Robbie Campo.
The government has received broad support for other proposed reforms, such as placing a ceiling on tax-free investment earnings in retirement.
But MPs claim to have received fewer donations and found it harder to find volunteers for polling booths during the election because of the proposed changes.
An MP group is set to take alternatives to a party room meeting on Monday but have been told any changes must be confined to super and garner the same level of savings.
The MPs are said to be trying to come up with other policies – and the requisite $2.5 billion in savings – so the most contentious elements of the plan can be dumped.
Former employment minister Eric Abetz and West Australian senator Chris Back publicly questioned the government’s approach in separate radio interviews on Thursday a day after Prime Minister Malcolm Turnbull reiterated his support for the budget measures..
“Dyed-in-the-wool Liberal voters said to me they were very, very upset by the suggestion that something backdated to 2007 was not retrospective. They felt insulted by that comment,” Senator Back told the ABC.
Senator Abetz, who left out of cabinet when Mr Turnbull became prime minister, said the retrospective nature of the $500,000 cap “hurt us within our base”.
The government insists the changes will only affect four per cent of superannuants.
Liberal Party members in Victoria are pushing for an extraordinary state meeting to air their grievances.
Save Our Super, established by Melbourne QC Jack Hammond, who is not a member of the Liberal Party, said the changes should at the very least be grandfathered.