Changes to superannuation – in particular the capping of it – has drawn the attention of retirees nationwide over night, and the Association of Superannuation Funds of Australia (ASFA) CEO Pauline Vamos has dubbed many of the changes “not mature”.
The total package involves over $3 billion in net additional tax revenue being raised over the forward estimates period from superannuation contributions and investment earnings, and around 560,000 people will be affected by the changes.
ASFA CEO Pauline Vamos said “the changes to superannuation in the Budget go beyond redirecting tax concessions to those with low incomes and low balances, and limits the amount people can contribute to the superannuation system, which is still not mature”.
“In relation to specific measures, ASFA welcomes the introduction of the Low Income Superannuation Tax Offset (LISTO). This will provide a benefit of up to $500 a year for over 3 million people, of whom around two-thirds are women.”
ASFA has long advocated for support for low income earners contributing to superannuation. The LISTO scheme provides this and makes the superannuation system stronger.
While ASFA has previously supported a $2.5 million cap on balances that can be transferred to the tax free retirement phase, the Budget proposal for a cap of $1.6 million goes much further.
A $2.5 million cap will have an impact on over 50,000 people, and involve additional revenue of under $500 million a year—while a $1.6 million cap will affect more than 100,000 people and result in additional revenue for the government of $1.15 billion by 2019/20. ASFA will need to do work to understand the impact on retirement incomes.
“We do not support the reduction of annual concessional caps to $25,000. While today less than two per cent of people (around 255,000) with superannuation make contributions above $25,000, a significant number of such individuals that have low balances are attempting to catch up. For instance, around 36,000 women with balances less than $200,000 in 2013/14, were making contributions in excess of $25,000.
“The changes to the flexibility caps will allow women, in particular, who currently retire with less than half the superannuation of men, to catch up. However, the restriction of a five-year period for the calculation of previously unused cap amounts restricts the effectiveness of this.”
It will be important for the government to consult on the implementation of a number of the measures. Some of the measures have the potential to significantly increase administration costs of funds. Such costs would likely be passed on to all fund members, not just those directly impacted by the changes.
“There is a lot in these announcements. We will need time to assess their impact and fully understand the consequences,” Ms Vamos said.
My question relates to the Treasurer’s statement “A balance of $1.6 million can support an income stream in retirement around four times the level of the single age pension”…Really….With Bank interest rates down to 1.75% and term deposits down to about 3.0%, my simple sums say I earn $28,000 and $48,000 respectively. Hardly 4 times a single age pension??
The capping of Retirement Savings in the tax structure called superannuation by the Australian Government is extremely alarming. Not everyone gets a regular pay packet. This will have a dramatic impact on most small business owners, farmers, graziers and investors. These people only get their money to retire on when they sell up their business, their land, their asset. After they pay their taxes they are now being told they will be taxed again and probably can’t get most of their money into super!
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