The Turnbull Government’s superannuation reforms are now law, after Federal Parliament voted on Wednesday to accept the package of tax changes.
Treasurer Scott Morrison claims that the new package will limit concessions for wealthy savers, will give the budget a net saving of $3 billion and will make the system fairer and more sustainable for all.
Under the new rules, the annual cap on non-concessional contributions will drop to $100,000, until the lifetime balance cap of $1.6 million is reached.
And from 1 July next year, there will be a reduction to $25,000 on the annual cap on concessional super contributions.
Wealthy savers still have a chance to add three years’ worth of non-concessional contributions, or an extra $540,000, into super before the 1 July 2017 deadline.
Although Labor eventually supported the Coalition on the changes, Shadow treasurer Chris Bowen was disappointed that the Government didn’t prioritise retaining Australia’s AAA credit rating by accepting an extra $1.4 billion in cuts proposed by Labor.
“A Treasurer whose clear focus is on retaining Australia’s prized three AAA credit ratings, would be working with all parties on all potential savings proposals,” said Mr Bowen. “The Treasurer today chose to create new super tax concessions that largely benefit high income earners at the urging of the extreme right wing of the Coalition party room, over enacting further measures to deliver more budget savings.
“Assuaging the extreme right wing of the Coalition party room is a more important objective than securing Australia’s triple-A credit ratings.”
Labor argued that the ‘catch-up’ option would be used predominantly by men on high incomes, rather than women trying to top up their super after taking leave from work.
Although the Government claims the new system will be fairer for women, Finance Minister Mathias Cormann can’t prove it.
“You might want me to put a thumb in the air and give you a number but it wouldn’t be honest,” he said.
Labor also said it would fight the Government on the rewording of the purpose of super. The Coalition’s current definition is “to provide income in retirement that substitutes or supplements the Age Pension”.
To help guide future direction of super policy, Labor wants to wants a definition of the standard of living afforded by the Age Pension, such as ‘adequate’ or ‘with dignity’.
Are you happy with the changes to super? Do you expect to benefit from the changes? What do you suggest for the rewording of the purpose of super?