When the Government announced last week it would scrap plans for a $500,000 lifetime cap on after-tax super contributions, critics claimed it was a backflip made to appease the “super rich” – the fraction of Australians who could afford to top-up their funds by more than $100,000 per year.
Changing the lifetime cap on non-concessional contributions to $1.6 million and allowing people to shift up to $100,000 after-tax to their funds per year – or bring forward three years’ worth of contributions in a $325,000 lump sum – has only affected 80,000 people, compared to the Low Income Superannuation Tax Offset of up to $500 per year, which affects over three million Australians earning $37,000 or less.
In its announcement, the Government stated that reducing the annual cap from $180,000 to $100,000 would make Australia’s superannuation system “even fairer, more flexible and more sustainable”. However, with estimates from the Association of Superannuation Funds of Australia showing the average super balance for a 65-year-old man is $194,633 and $117,144 for a woman of the same age, it begs the question: fairer for whom?
“The Government has caved in to the super rich by abandoning the $500,000 lifetime cap on after-tax contributions since 2007,” said Paul Versteege, policy advisor at the Combined Pensioners and Superannuants Association.
“After-tax contributions must stop once people have $1.6 million in their super, but this is virtually meaningless as only 1 per cent have that much. To pay for this, the Government robs the poor by abandoning the measure enabling over-65s to make after-tax contributions to their super.”
The Australian Council of Social Service (ACOSS) welcomed the “sensible, if modest” proposed caps on high-end super for annual non-concessional contributions, but criticised the loophole to allow the wealthy to shift three years’ worth in a lump sum.
“This means that people can contribute up to $325,000 in any given year, which undermines the intent of the lower annual cap, and will overwhelmingly benefit high income earners,” said ACOSS president Cassandra Goldie.
However, Industry Super Australia (ISA) praised the measure to reduce the annual cap from $180,000 to $100,000, which will “help rebalance unsustainable tax breaks and redirect greater support to lower paid workers who need the most help to save for retirement”.
“The proposed measure will restrict superannuation being used for estate planning, while providing greater support for many more, lower income Australians saving for retirement, including 5 million members of not-for-profit industry super funds,” said ISA chief executive David Whiteley.
“Most importantly, there is cross-parliamentary support for the Low Income Super Tax, which will boost the savings of more than 3.3 million Australians on lower incomes, particularly women.
“We are confident that the commitment of all parliamentarians to better target super tax concessions will lead to a positive outcome for Australia’s superannuation savers.”
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Announcing its “improvements” to the 2016-17 Budget’s superannuation changes last week, the Government proudly declared it would make the system “even fairer, more flexible and more sustainable”. But with one of its prize proposals only affecting 80,000 Australians – the ‘super rich’ – just what is it doing to help the rest of us?
Treasurer Scott Morrison and Revenue and Financial Services Minister Kelly O’Dwyer released a joint statement, saying the $1.6 million lifetime cap would ensure that “we focus the entitlement for after tax contributions to those Australians who have an aspiration to maximise their superannuation balances and reach the transfer balance cap in the retirement phase”.
In this context, the words ‘entitlement’ and ‘aspiration’ smack of patronisation and privilege; when few average Australian workers are able to afford to make after-tax super contributions, let alone $100,000 per year, what good is ‘aspiration’? Australians saving for retirement need policy based on reality, and low-to-average-income earners are the ones who need assistance the most. So, just who is ‘entitled’, Mr Morrison?
What do you think of these super changes? Which measures would you like to see implemented to support the average Australian worker?