Scott Morrison sheds more light on super cap exemptions

Treasurer Scott Morrison sheds more light on ‘life event’ super cap exemptions.

Scott Morrison sheds more light on super cap exemptions

Treasurer Scott Morrison has again used the media to drop clues about the Coalition’s superannuation ‘life event’ cap exemptions.

The $500,000 lifetime cap on non-concessional super contributions has been a hot button issue for the Government, after it was announced as part of the Coalition’s super reform package in Budget 2016/17.

Speaking to the media yesterday, Mr Morrison announced that divorce would be a life event exempted from the controversial lifetime cap, as well as settlements resulting from accident compensation claims.

"We said before the election … that one of those events was a settlement that might have come from a compensation claim or something of that nature. Other issues in relation to Family Court matters and things like that, the details of that [are] being worked through," he said. "But you've got to get the detail of that right and you've got to work it through properly so we don't create any unintended consequences."

Mr Morrison also all but ruled out inheritance windfalls and lottery wins as part of these exemptions.

"In relation to inheritances and lottery wins, no, they're not things being contemplated by the Government and nor have they been," he said.

The Treasurer denied that exempting divorce settlements from the lifetime cap would encourage couples to separate in order to improve their retirement income, claiming that any such notion is a " ridiculous suggestion".

Welfare groups are calling on the Government to stick to the “modest” superannuation reform it took to Election 2016.

Labor has also urged the Government to work out its super reform package in full instead of leaking it to the media piece by piece.

"These sorts of bite-sized announcements ... to see how they run in the media is not really a way we can engage properly with the government," Opposition frontbencher Brendan O'Connor told ABC Radio yesterday.


What do you think of these exemptions? Would you prefer the Government to finalise its plans for super rather than hearing about it piece by piece? Which exemptions do you think should be included in the Coalition’s superannuation reform package?



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    19th Aug 2016
    From the AFR - '...the Treasurer is canvassing with the backbench either lifting the cap to $750,000 and leaving it backdated to 2007, or leaving it at $500,000 but making it prospective, meaning it would apply from budget night or some other date onwards.'

    That will certainly be better than having to temporarily divorce for tax planning purposes!
    Old Geezer
    19th Aug 2016
    If you can Have $1.6 million in a pension you should be able to put in $1.6 million. It is as simple as that.

    Yes I know the government wants people to keep their pension with current tax status so that their heirs get slugged with tax after they die. No taking it out and putting it back in to change the tax status.

    There is already talk of people divorcing to maximise their super and tax.
    19th Aug 2016
    why not privatise all our super funds all sell them to a foreign country like the rest of Austrlia.
    19th Aug 2016
    Except for mostly unfunded government super schemes - they are all private - so theoretically they could be sold I assume?
    19th Aug 2016
    Ummm - I think this is the case already. That's what driving the push to force us to put excess equity in the bank. Maybe they need to make it compulsory for at least 50% of invested super funds to be invested in Australian industry so the money is remaining here. IN THE FUTURE.
    19th Aug 2016
    What is the level of our polititicans,3years to make policy ,running around like chooks
    With head cut off!
    19th Aug 2016
    Fredlaus - we want a delay long as possible. I am sincerely hoping the Senate will throw out their attack on our money.
    19th Aug 2016
    "The Treasurer denied that exempting divorce settlements from the lifetime cap would encourage couples to separate in order to improve their retirement income, claiming that any such notion is a " ridiculous suggestion"."
    Surely both people in a relationship would be entitled to the same lifetime cap? This is why its unfair on this aspect as it cost a single person more than 1/2 that of married couples to run a household.
    I don't think married couples should be entitled to less their just shouldn't be a cap at all. Its our money - why can't it go into super.
    If they want to limit the tax concessions over a certain amount, IN THE FUTURE, then surely that could apply to excess investments into the super fund.
    I still haven't heard the words "indexed with inflation" ever mentioned either.
    19th Aug 2016
    My guess is they are limiting the amount to a total of $500K because until the last budget changes you had the ability to withdraw and immediately re-contribute non-concessionally $540K every 3 years using the 3 year bring forward rule and wash out death tax from your super.
    Old Geezer
    19th Aug 2016
    That death tax on super is so inequitable. If I know I am going to die my super will be withdrawn just to save the tax.
    22nd Aug 2016
    For once, I agree with you Old Geezer. The death tax is patently unfair and wrong. If we can leave personal assets to children without penalty, why not superannuation? All the stupid death tax does is encourage lump sum withdrawals, and punish the honest and those who have little or no warning of impending death.

    If stupid politicians stopped attacking the honest and responsible we might solve a lot of economic problems and eliminate the ''welfare mentality'' that their attacks create. But I guess the honest, hard-working, responsible savers are easy targets. And bastards always attack the easy targets, don't they? Not intelligent enough to do what is right, logical and practical. Or maybe not lacking in intelligence, but just totally lacking ethics or integrity.
    19th Aug 2016
    I would also like to let Scott Morrison know that while the government may have snookered me, my children, in the light of this debacle, are all planning alternative means to supplement their superannuation portfolio. He should be reminded that if they don't invest in super then this generation of retirees is going to be in even more financial difficulty.
    19th Aug 2016
    Rosret - tax on amounts above $1.6m are only taxed at 15% - so that is not unreasonable.

    But once you are of pension age (you don't have to qualify - just be of pensionable age) you can get the SAPTO - the seniors and pensioners tax offset, which means you can earn up to ~$59K as a couple before you pay tax.

    Your super is not counted for tax purposes if you are under the $1.6m - so you could effectively have another $1m or so outside super and still remain tax free.

    The system is still very generous.
    Old Geezer
    19th Aug 2016
    One question being asked is what happens with reversionary pensions if a couple has $1.6 million each in super?
    19th Aug 2016
    Gees, and here I was, thinking I was doing well with $250,000.
    19th Aug 2016
    That is an interesting point - had not thought about that or seen it raised.

    I suppose when you think about it, if you managed to generate 10% on the additional $1.6m - you would pay only $24K at 15% in tax on a total income of $320K.

    That is only 7.5% tax on the $320K total - which is probably fair and hard to complain about.

    You could always move $500K plus out of super to get the SAPTO senior and pensioner tax offset benefit in your own name, thus lowering that $24K tax - or into a family trust if more tax effective.

    Will be interesting to see what they do.
    Old Geezer
    19th Aug 2016
    Unless it is specified then I don't think you will have to pay anything extra in tax as a reversionary pension is paid as if that person is still alive.

    This question has been raised on a number of occasions lately and even the experts can't answer it.
    Happily retired early
    19th Aug 2016
    Younger people are turning off super in droves and why would you invest in something that once you have locked up your money the government changes the rules. It is not the governments money and should be treated as such.
    Younger people need to be encouraged to invest in super and be able to see benefits for themselves in the future.
    Old Geezer
    19th Aug 2016
    If I was under 40 I certainly wouldn't be putting any more than I had to into super. There are much better places to invest your money and you don't have the complications of super to worry about.
    19th Aug 2016
    Disagree totally Happily - I have been in super for over 40 years and have heard people say that about governments and super since I started.

    The retrospective $500K cap this government invented is the FIRST time one has tried it - and it is apparently not working out well for them.

    Super is, and remains, one of the most tax effective investments available - and will likely remain so for the future.
    20th Aug 2016
    Personally I'd rather pay a bit extra tax than have my money all tied up in super as it gives me more flexibility in where to invest. Super is also a hiney pot the government would like to get hold of and I have no doubt it will some time in the future. If a bit of extra tax is all that is needed to keep my money mine then I will pay it.
    20th Aug 2016
    Bonny - if you have an SMSF you have the same flexibility as you do with your money outside super.

    Apart from compliance, there is no difference - and you generally get to accumulate and keep more assets in super over time.

    19th Aug 2016
    I really wish these government cretins would either crap or get off the pot. These people are toying with Age Pensioners' lives and don't have either the guts or the smarts to make a decision. In the meantime we do not if or what to do now for the future. This government is about as useful as tits on a bull. Fair dinkum, just a bunch of tossers!!
    Old Geezer
    19th Aug 2016
    Agree people and businesses are suffering due to all this indecision by the government. It is such a stupid policy to start with and one that has lots of loopholes that smart accountants will run rings around.

    I say scrap it and make it simpler not more difficult. Just put a cap of how much you can have in super in the pension phase or a cap on the income you can earn tax free from super. So much easier to manage and police.
    19th Aug 2016
    Agree - instead of Govt worrying so much about how caps in Super affect rich people, a better and really simpler solution is to give all Individual / Couple Age Pensions (if they paid taxes here for say 10+ years), get rid of Centrelink role (in Pension eligibility assessments), put caps on how much you can have in Super (with concessional / no tax), and impose taxes based on all other income.
    20th Aug 2016
    From what I have read the super rich we are all talking about numbers around 200,000...not a great many in my book out of a population of $24 million.

    Taken form super web site last year.

    "There are over 200,000 people who have superannuation account balances in excess of $1 million
    More than 210,000 people have more than $1 million in superannuation, the majority (140,000) of whom are
    self-managed superannuation fund (SMSF) account holders. The remainder (70,000) are in APRA-regulated
    funds. Around 140,000 persons have more than $1.5 million in super, 100,000 in excess of $2 million and
    about 70,000 in excess of $2.5 million."
    20th Aug 2016
    Interesting point Pepe.

    There seems to be an excess waste of time, energy and money on the very few really wealthy in Australia.

    I do blame financial advisors as they continue to sprout the idea that retirement savings should go into the superannuation vehicle when it is perfectly legitimate to have another fund outside of superannuation and earn quite decent returns in retirement tax free. And get out real quick if you need to.

    The government would be better off spending energy on boosting company investment in real earnings growth ventures and working out how the hell the economy will get all those robots and machines to become consumers. Or as George suggests how to get money into the hands of human consumers because business fails to realise that sacking their consumers doesn't help investment returns one bit in the longer term.

    Until that problem is fixed then earnings within super will continue to decline. We have been lucky so far with the quick fiscal actions of Swan,the mining and gas boom, sales of long held public assets,currency boosts to international share funds and the recent returns on REITs.

    The current government has made serious fiscal mistakes in attacking aged part pensioners in my opinion. The couple of billion going to retiree public servants as a reward for all super being post tax payments was not a problem but the $125 billion flowing out each year to overseas owners of just about everything is a problem.

    We now need new assets and businesses to replace those sold off.
    To provide the jobs and growth. Without that putting money into superannuation is pretty pointless. You need returns on equity to continue and that will require clever thinking and policy to make it easier for local businesses. To date the policy has all been about making it easy for overseas investors and international owners.

    Those few really rich dudes taking up all government time and energy.
    20th Aug 2016
    Pepe - when you are lucky to get a return of 3% - which would return not much more than the single pension - you can hardly define someone with $1m as even close to super rich.

    It's always interesting to note that a pollie who gets a pension of $120K has effectively got $5m backing them at 3% - or put it another way, if they were self funded - they would need around $5m. The way their payments are structured they avoid the $1.6m limit.

    Rae - I understand what you are saying about having tax effective funds outside of super - but super just makes it far, far easier tax-wise to compound your assets much more rapidly, especially if you start young.

    As for consumption, I find that to be an interesting conundrum for our society as a whole.

    You need people to consume to make the economy as we know it work, BUT, if you choose to be a self-funded retiree in your old age you need to let others do that consuming generally - and save and invest yourself.

    However, those who do save and invest become the target of government and the masses because they have accumulated higher levels of assets, often just because they delayed their consumer gratification that others didn't.

    Successive government target the high spending level on age pensions and the consuming masses are affronted by governments lack of compassion for their years of faithful consumer profligacy and associated taxes.

    It is an interesting social dichotomy, is it not?
    20th Aug 2016
    REITs are now about 20% over valued so I have been cashing mine in and investing elsewhere.
    20th Aug 2016
    Yes Bonny I can't see much value anywhere right now but agree REIT's have had a good run and time to take profits.

    Thank you Reasons it is certainly a situation not easily solved.

    19th Aug 2016
    Can we please talk about anything but superannuation for a while? Ever since the budget, we have been continually bombarded with someone wanting our opinion on super and nothing much has changed since the budget. Sure, we have thoughts and ideas but nothing of any substance so after the first flurry of comments, everything we are now reading is a rehash. Maybe this will be a hot topic when the full list of changes is released and we have something concrete to discuss.
    19th Aug 2016
    Have you seen the price of fish in Denmark?
    19th Aug 2016
    Thank you Fred, now that's a subject that I can really enjoy. ?
    19th Aug 2016
    Seen the price of Flathead tails at the fish co-op?
    20th Aug 2016
    The subject of the article IS superannuation, or did you not notice that?
    19th Aug 2016
    Don't consider any half baked compromise that Morrison may propose... He needs to back off totally on screwing super and the majority of people who are trying to fund a comfortable lifestyle in their final years.

    19th Aug 2016
    Easy - all this shenanigans and running around could be resolved by simply paying everyone Pension and taxing all income over and above as per the normal scales. That would, naturally, catch all the overly fat retired politicians, so is a very unlikely move.

    You would need to be in a very good super situation to suffer under such a system, and since most people have only had a maximum of 24 years to accumulate super, most of the current lot will be nowhere near that, so will not be affected.

    I say again - I fail entirely to see why there is such a great panic in Cambra over super, since it has only been in place for all since 1992 - not even a lifetime's work for most, and has had no time to 'bite' yet in terms of retirement funding for the majority.

    Yet the clown show - the Two Ring Circus of Federal Politics - is in an utter panic over 'rising costs of Pensions'.... without taking into consideration that in another 26 years, MOST people will have some super put away and thus the burden of Pensions will be reduced.

    Wonder why I smell a rat in the whole deal? Either there is a big rat in there or these politicians are plain dumb.
    20th Aug 2016
    Yes by the time it all gets out it will be confusing like this goverment .meanwhile consumer and voter confidence is fading.this fudge gov has no real direction other than to as per track record rip if the poor to fill their fists before 3years is up because believe me they know the next election they are doomed because there won't be any funds left any where and we will be looking at bankruptcy they are there for the money nothing else so get used to it
    21st Aug 2016
    Just in case you want some light reading, re SUPER -The Grattan Institute, John Daley, and others wrote a 96 Page Doc in Nov 2015 Titled Super Tax Targeting, the following is just the SUMMARY page FYI. Just remember who Grattan Institute is when reading this

    Note the reference to "Rich Old Men"

    Summary page ONLY from report
    Tax breaks for superannuation contributions and earnings should
    be targeted more tightly at their policy purpose. The current
    system is expensive and unfair.
    Superannuation tax breaks mean that less tax is paid on super
    savings than is paid on other forms of income. These tax breaks
    should only be available when they serve a policy aim. Although
    the $2 trillion superannuation system does not have legislated
    aims, most believe it should encourage savings to supplement or
    replace the Age Pension.
    Yet superannuation tax breaks often go well beyond this purpose
    and their costs are unsustainable. The tax breaks reduce income
    tax collections by more than $25 billion a year. More than half the
    benefits flow to the wealthiest 20 per cent of households who
    already have enough resources to fund their own retirement, and
    whose savings choices aren’t affected much by tax rates.
    Three reforms are needed to target superannuation better.
    ‘Concessional contributions’ made from pre-tax income should
    be limited to $11,000 per year. Eighty per cent of contributions
    above this level come from the 20 per cent of taxpayers with the
    highest incomes, people likely to retire with enough assets to be
    ineligible for an Age Pension. This change would improve budget
    balances by $3.5 billion a year. Other options, such as levying
    higher taxes on contributions made by higher income earners,
    would be less well targeted and more complex to administer.
    Replacing the annual cap with a lifetime cap sounds attractive
    because it appears to allow people with broken work histories to
    catch up, but it would mainly turbocharge tax planning for wealthy
    older workers.
    ‘Non-concessional contributions’ made from post-tax income
    should be limited to $250,000 over a lifetime. Of the $33 billion in
    post-tax contributions each year, around half are made by just
    200,000 people who already have at least $500,000 in super.
    Earnings in retirement – currently untaxed – should be taxed at
    15 per cent, the same as superannuation earnings before
    retirement. More than half of the benefit of tax-free earnings in
    retirement goes to the wealthiest 20 per cent of retirees. For the
    top 10 per cent of over 60s drawing on super, the tax benefits are
    extremely generous – they pay no tax on their average super
    earnings of $85,000 a year. A 15 per cent tax on all super
    earnings would improve budget balances by $2.7 billion a year
    today, and much more in future.
    The proposed reforms are fair. Low-income earners and younger
    people would pay less in other taxes if super tax breaks for the
    wealthy were wound back. Those already retired would pay some
    tax on their superannuation savings, but they would pay much
    less tax than wage earners on similar incomes. For a small
    proportion of women with higher incomes later in life, the changes
    would reduce their catch-up contributions. Yet the changes would
    reduce the tax breaks far more for a lot of rich old men.
    The changes to contributions taxes would be prospective. The
    changes to earnings tax rates, like changes to income tax rates,
    would apply to future earnings of assets already acquired.
    Previous repeated changes to superannuation have been too
    timid. A wide gap remains between the purpose of the system and
    what it actually delivers. Decisive reform must target
    superannuation tax breaks at those who need them most.
    22nd Aug 2016
    Some of this makes some sense, but there would be some undesirable consequences, and there are surely better ways to address the problem. Seems to me the simplistic solution of changing from a global tax break on super contributions to a 15% discount on the contributor's highest personal tax rate would be fairer, but that's just an opinion based on what I've read thus far.

    What would be SERIOUSLY unfair is a 15% tax on super income where incomes are low but asset disqualify the member from pension benefits. That appears to me to be double-taxation!

    What is most disturbing to me is that super and pensions are being viewed in isolation. There is no hope of getting it right while the two are considered as separate issues. In addition to that, there is complete disregard - it seems - for the fact that decisions affecting the current generation of retirees should consider the reality that most of them had NO super until late in their working life, and many transferred personal savings into super, deceived to believe that would give them an advantage in retirement. It would be grossly unfair to treat their personal savings in the same manner as superannuation contributed by employers on behalf of employees.
    ex PS
    22nd Aug 2016
    If the government does not make up its mind and take a leadership role on Super soon it will be totally destroyed, nothing like uncertainty to unravel a project.

    23rd Aug 2016
    "Reasons" I certainly agree with your comment as we are a couple who also did just that. We have chosen to make sure we can look after ourselves in retirement and not be a burden on the government or our family.

    "However, those who do save and invest become the target of government and the masses because they have accumulated higher levels of assets, often just because they delayed their consumer gratification that others didn't."
    23rd Aug 2016
    Its called 'Catch 22'

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