Coalition backflip on superannuation hurts retirees

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In a major reversal of an ‘iron-clad’ election policy to support the super changes in the 2016 Federal Budget, the Treasurer yesterday announced the lifetime cap would now be dumped.

After intensive lobbying by government backbenchers, perhaps the most controversial of the changes, the $500,000 lifetime non-concessional cap is out, replaced by a reduction in the annual cap from $180,000 to $100,000. Those under 65 will still be able to use the ‘bring forward’ rule to make three-years’ worth of non-concessional contributions in one financial year. Whilst this is ‘typically less than $200,000’ it can be up to $325,000 until the limit of $1.6 million is reached.

From 1 July 2017, anyone with a superannuation balance over $1.6 million will no longer be able to make non-concessional contributions to super – a limit that will henceforth be indexed to the balance transfer cap.

It is estimated that only around one per cent of superannuants actually reach the $1.6 million transfer cap. By replacing the lifetime non-concessional cap with the reduced annual cap, the Government will forgo around $400 million in savings over the forward estimate period so, to make up this shortfall, the Government will no longer proceed with the harmonisation of contribution rules for those aged 65 to 74.

This may be considered a blow to older Australians trying to boost their superannuation savings, as the proposal to remove the restrictions on 65 to 74 year olds making voluntary contributions has been scrapped to fund the changes to the lifetime non-concessional cap.

Put simply, if you wish to continue to contribute to super after age 65, you will need to be in the workforce. This will obviously make things difficult for those unable to work for reasons of health, discrimination or those working in ‘sunset’ industries such as manufacturing.

Catch-up concessional superannuation contributions will be deferred until 1 July 2018 to ensure the full cost of changes to non-concessional contribution arrangements are met over both the forward estimates and the medium term.

Mr Morrison described the changes as ‘fairer, more flexible and sustainable’ and said that he expected this revision would receive Opposition support. “It removes every impediment that Labor mentioned,” he said.

Shadow Treasurer Chris Bowen claims that the Government had backflipped on the ‘iron-clad’ policy it took to Election 2016 and that Labor would not simply wave it through, adding that his party would take time to fully scrutinise the package before giving it the option to pass.

Read Mr Morrison’s press release
Read detail of the superannuation changes with facts sheets

What do you think of these changes? Is the Government satisfying the needs of the wealthy over the needs of the rest of us? Or do you think they are fair changes?

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Written by Debbie McTaggart

133 Comments

Total Comments: 133
  1. 0
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    The proposed $500,000 lifetime non-concessional cap would have affected 1 or 2 percent of Australians. How many people can afford to contribute such huge sums from their post-tax incomes? Still everybody made so much fuss about it. It looks like all parties are working only for the rich. There should have been more focus on the reduction of concessional contribution from $35000 to $25000 and the means test of assets which would affect a larger section of people.

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      There would be a lot of people downsizing, selling their home which has gone up in value substantially and wanting to put the excess in super – I know I want to but they’ve made it harder now.

    • 0
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      Be able to contribute up to 75 certainly would of helped with tax planning but there is always plan B.

    • 0
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      As ScoMo said – it does give people an aspirational amount of $1.6m to aim for – which is not a bad thing for the country’s finances if you can get there.

      And you don’t have to be so-called super rich to benefit if you are under 65. You can wash out some or all death tax by re-contributing $100K per year and $300K 3-year bring forward just before 65, re-balance super amounts between partners in an SMSF, etc.

      It will work for many people – IF they pay attention to the rules – most won’t unfortunately.

    • 0
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      I am disappointed too OG as I had planned to add to a small accumulation fund still running, adding savings each year until I reached 75 but that lazy cruise around the Pacific will be more fun anyway.

    • 0
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      I agree Rae. So that lazy cruise around the Pacific in November/December was a good idea after all.

    • 0
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      Most definitely OG.

    • 0
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      Rae – assuming you are of pensionable age, you can use the Seniors and Pensioners Tax Offset (SAPTO). This means you can earn around $28K per year tax free and compound it as required.

      No different from super tax-wise in reality. I don’t understand how just because one door might be locked why most people don’t look for the one that is open?

    • 0
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      The idea is to use your SAPTO and then have the rest in super so that you pay little if any tax.

    • 0
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      RAE has stated that she wanted to use super to save until 75 – but now can’t because of the new 65-74 rule changes – so Rae is going to spend it instead.

      So super is now not an option for Rae.

      I am saying there is the SAPTO option to use outside of super that has the same tax advantages of super for the amount she appears to require – so you are not disadvantaged by the 65-74 rule change to super – if you are prepared to look.

    • 0
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      Thank you Reasons.

      I do use the SAPTO up to the limit and with deductions it is closer to $33000. I was always suspicious of superannuation funds and government meddling with them. Most of my income producing assets are held outside super.

      I also have a pension from super. I had two funds. In fact I had three. One from academic lectures and work I did for the army. I rolled that into my main fund and take a yearly pension from it.

      I have never spent all I earn. I always save. You need to be prepared. I’m pretty frugal actually.

      The door unlocked is a lovely holiday. There is nothing wrong with it. I travel quite a bit actually. It is the one thing I indulge my savings on.

      If the government doesn’t want my savings going into super after 65 and retirement I’m not going to argue. Let’s call it what it is— A tax minimisation scheme and it mostly serves the wealthy.
      It is a good thing that those tax concessions are beginning to be brought under control.

      As I’ve said before I make more money outside super, with very few rules or impositions and claim the huge tax deductions and pay my tax after that. I do not fear tax at all.

      Where did I ever say what amount I require Reasons. There is no new rule changes. You were never allowed to contribute after 65 unless working.

      If I really wanted to I could work in my son’s business for a month and use that to contribute tax concessional amounts but it just isn’t that important. But that tool makes a mockery of the whole thing really doesn’t it.

      As I said I had planned on using the accumulation fund still running if the rules changed but they haven’t. Bit of a shame for me but not really all that important.

    • 0
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      Rae – you just indicated you wanted to save over time – so I just guessed that it would not be more than say $500K-$600K in a SAPTO environment. (eg $600K at 5% = $30K interest/return – therefore you roughly keep under the taxable threshold).

      Morrison was going to let us contribute concessionally up to 74 without working – but that is now dead so he can make savings there now he has allowed the $100K annual cap.

      Travel is good – we enjoy the same thing.

  2. 0
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    Good to see people can actually now get to $1.6 million however one should still be able to contribute non-concessional money up until 75.

  3. 0
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    Bloody typical of this govt, I’m fed up with them and so glad I didn’t vote for them. I’m 66 and not working as my work in Aged Care played absolute havoc with my back. I recently had a small to average inheritance from my parents which, after the last budget, I’d hoped to put into super to increase my income. Can’t now, and with interest rates the way they are I may as well spend the lot.

    • 0
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      You can get the Seniors and Pensioners Tax Offset (SAPTO). This means you can earn around $28K per year tax free.

      If you had $500K invested and got 5% p.a. – you would earn $25K and not pay any tax.

      There is always more than one way to skin a tax cat to your advantage – you don’t have to be a so-called super-rich to get tax benefits if you ask questions and research.

      This works for super – as well as those without it. Super does not count as income – so you get the tax free threshold outside super and SAPTO is tax effective if you go past $1.6m.

    • 0
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      I think they should have allowed people up to 75 to contribute even if not working.
      You can still contribute but you need to work 40 hours at least to do so.
      Maybe some could get a temporary job to qualify to put in extra super i.e. an inheritance

  4. 0
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    What a disgrace! Once again, hurt the battlers to indulge the rich. First, a relatively small number of retirees were viciously attacked and deprived of up to half their income – a disgusting act of discrimination that made a small group carry the cost of economic downturn while the rest of the community remained relatively untouched by comparison. Now the battlers who can’t remain in the workforce after age 65 are forced to bear a financial burden so the very rich can be over-indulged.

    This government is disgusting.

    • 0
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      Circus acrobats actually

    • 0
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      Yep, this government is disgusting, as were all the others before it.

      So the question remains, WHAT ARE YOU GOING TO DO ABOUT IT?

      I can assure you quite categorically that Turnbull and Co don’t read the incessant rants on this website, so they neither know nor care what you think.

      So again I ask, WHAT ARE YOU GOING TO DO ABOUT IT?

    • 0
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      I can’t see how this is going to hurt the battlers at all or can I see how it will indulge the rich either. All it will do is make it simpler and not make accountants rich because of the complexity of the original proposal.

      Battlers as well as the rich can remain in the workforce after 65 and can still retire when ever they wish. No change there. Only change that was not approved is that those with money can’t contribute after they reach retirement age unless they are in the workforce.

      Nothing disgusting about it all Rainey.

    • 0
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      I wonder why the Labor party was so bitchy about letting past workers top up super. Was it really going to cost much or was it just ideological? Up until that 1.6 mil surely it would not have hurt.

    • 0
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      It will have no effect on those on here who are getting the pension…I dont know why they are so upset…unless they are telling porkies and have a lot of money squirrelled away?

  5. 0
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    Only 1% reach the magic $1.6 million figure. So who are the changes meant to benefit? Obvious.
    Given that governments (taxpayers!) heavily subsidise the superannuation system I might have thought that it would make no difference to take out most of the subsidies and pay a proper pension. The only difference is that currently money which could be allocated to pensions is primarily being given to the top end via the superannuation system. That is wrong but that is politics. The rich man’s party always looks after its cohort. Hence the backflip on the iron clad election lie. Never changes.

    • 0
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      10% at the moment not 1%. However inflation is going to take that up within a few short years. But never fear, I just got my 2015-16 super statement. My super fund is going to make sure I never reach that target!
      Malcolm is probably doing us a favour. Invest in asset producing ventures and take care of your own retirement. The advice I am giving my children is a complete 180 from what I have done. Silly silly me.

    • 0
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      Rosret – I totally agree – you have to learn from your own mistakes and make sure your kids don’t repeat them. I see nothing wrong with an aspirational figure of a $1.6m indexed amount.

      If you are fortunate enough to be self-funded you don’t have the pressures of being ‘owned’ by the reigning government elites ideology and pension limitations.

      The more your kids understand this and do something about it – the better off they will be.

    • 0
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      We do not have money in super any more but we do have assets outside of super.
      The thing with super is that tax is only 15%. That is a wonderful deal if you are trying to escape the top marginal rate of 49%. When you get your money it is then all yours to do with as you wish.
      My take is that you need a mix of both. This is what the rich do: they milk everything they touch to get the best out of everything whilst getting taxpayers to subsidise them for whatever they can. Sadly the rest of us are not in that league because they do not earn high incomes. That’s life…and politics.

    • 0
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      Interesting Mick that you don’t play the game but you want to make the rules. You don’t have super, you don’t want to have super yet you want to tell those who have super how you want it to be.

    • 0
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      Old Man I think Mick is after the pension like all the Laborites on this blog, and obviously talks from his pocket book?

    • 0
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      MICK – your arguments are a bit convoluted – but if someone can use the tax laws (and it has to be done alongside smart investing over many years) – good on them if they are prepare to sacrifice consumption for a more comfortable retirement.

      I am sure there are benefits in not being reliant on government welfare, politicians largesse, Centrelink supervision and changes to pension payments if you can avoid it. It certainly is more cost effective for the public purse.

    • 0
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      The normal malicious argument you get from Liberal Party rusted ons.
      My ‘advice’ is on how to maximise returns so let’s not put words in other people’s mouths.
      Pension? Only if I sell our investments and spend the money. Certainly under a LNP government only the rich will end up well and retirees will be pushed off the pension left, right and centre.
      “Convoluted”? Hardly. The system was not set up for ordinary citizens. It never is. The elites have to provide just enough bait so that their own greed can be justified. Hence the current superannuation system.

    • 0
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      Mick – the same applies to you…

      If a person earning $60K per year saved $350 per fortnight and compounded it for 45 years at 5% – they would have $1.6m in their super. Remember – over HALF that $350 per fortnight is the compulsory super 9%.

      So a very ordinary and lowly Australian Labor voter could have $1.6m in super – because by using my simple compound interest figures – they saved for their comfortable retirement – instead of spending and consuming so they can make the rich and elite like Turnbull wealthy.

      I think even a rusted on Labor voter could end up understanding simple compound interest and how they too could use the super system and have $1.6m at retirement.

    • 0
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      The normal coalition rubbery argument. Who can save $360 per fortnight on $60,000 pa before tax. You make a laughing stock of yourself.
      I used the super system but have no money left in it as I do not trust our right wing governments. Blind Freddy can see them hovering over the super pool.
      My understanding of mathematics goes far beyond compound interest and your obvious basic understanding of the subject deride me as you will. As always it is the coalition trolls who lack any understanding about average citizens and their cost of living. Never changes for the elites.
      And AGAIN, for the record, I do not vote Labor….even though I sympathise with many of the party’s ideals.

    • 0
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      MICK – you are a very confused individual – but amusing in your ‘convolutedness’. I hate the Libs right wing with a vengance – but if think you can’t trust them to look after your super – you are seriously missing the point in the light of recent rule changes. I have been in super for about 45 years and have seen it all – governments have NEVER got away with retrospective taxes – didn’t this time either. Governments have been hovering forever – been the best environment I know for accumulating assets – and still is!

  6. 0
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    So much for Talkbull’s “ironclad”, and now it is over to Malcolm Gillard.

  7. 0
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    Who in the Mr and Mrs Average world , have 1.6 million in super ?

    I certainly don’t no where near it and I put in 30 years in a govt corporation , for a measly amount of lump sum, and paying 5% compulsory super each pay, all I could afford , so this story barely affects most retirees I’d say.
    Perhaps there are some who could afford to be higher super rate payer while working , a bit different with children over the years and commitments, so unfortunately I am quite surprised that there is this huge budget super story being reported when most of us won’t even be affected.
    And when most of us are the working parts of this nation but still struggle along with not much help even when helping yourself, while a minority are making heaps and getting giant supers.
    I am quite baffled?

    • 0
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      John, this is financial inequality brought about by rules, regulations, legislation, etc enacted by the GOVERNMENT for themselves and their wealthy and privileged cronies. The now PM lives in a world of his own, totally out of touch with reality as Australia’s working class knows it. This snob of a leader panders to the wealthy and couldn’t give a damn for the rest of the population. His only interest is having the title of Prime Minister and filling his pockets and those of his sycophantic greedy political supporters who get government assistance because of their contributions. This country is going right down the shitter because of this half-arse coalition with Talkbull as it’s puncy leader. Until he is ousted things will only get worse. This is a sad, but true, fact of life. This guy is ruining Australia!

    • 0
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      If you worked for the government as a public servant you probably didn’t get the tax concessions either. Not all saving into superannuation were able to access tax concessions or use re contribution rules to magically make tax concessional super look like fully tax paid super.

      Scott Morrison should have sorted that mess out a bit better. I don’t think he understood it at all.

      The whole trick of washing super should be stopped as far as I can see it is a rich person’s rort.

  8. 0
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    I see Abbott’s still in control

  9. 0
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    Simple Definition of ironclad
    : not able to be changed…
    – Who can now trust what the prime minister Malcolm Turnbulldust ever promises? – NO ONE CAN !!!!

  10. 0
    0

    Boo hoo. They favour their rich pals and themselves yet again. How about a pension and Newstart increase. BTW. I’m self funded. Sick of wealthy people whinging because they might have lost yet another tax dodge. Even more suck test the damned LNP listen to them.

    • 0
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      Why can’t super be a tax dodge as it is better for the economy than collecting the OAP?

    • 0
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      It is costing too much though Bonny. At $30 billion+ it is tax minimisation that really only benefits high income earners.

      Low income earners will never end up with much after fees and insurance etc so would be better off spending that money on a home in my opinion to save paying a landlord all their lives.

      I haven’t seen any evidence that it is better for the economy. Besides which the economy can look after itself providing society is fair and income distributed in an equitable manner.

      Like it used to be.

    • 0
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      Rae – I totally disagree – and Treasury have the figures supporting that it is a cost effective government retirement strategy.

      Taken from the Treasury link below – your assertions that super is an impost is dispelled – welfare is more costly – by over $9B…

      “The value of superannuation tax concessions in 2012-13 ($31.8 billion) is around $9.2 billion less than the value of direct income support for seniors ($41 billion).”

      http://www.treasury.gov.au/Policy-Topics/SuperannuationAndRetirement/supercharter/Discussion-Paper/Charter-of-Superannuation-Adequacy-and-Sustainability

    • 0
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      Only Adequacy and Sustainability Reasons. I’m surprised Morrison didn’t ask them to fling in Fair as well just to make it all seem real and efficient.

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