Treasurer Scott Morrison has delivered his first budget and despite promising it was, in part, to “assist older Australians by making super fairer”, the reality is that retirees and pre-retirees will see little or no benefit. In fact, the break from the norm of ‘grandfathering’ superannuation changes may mean that any savvy retirement planning they have undertaken could now be blown out of the water.
There is no doubt that this Government sees it as an individual’s responsibility to plan, fund and manage their own retirement. Not only has it implemented legislation that puts the onus to check a financial planner’s credentials firmly in the hands of individuals looking to engage their services, it has also done little to stop the systematic fraudulent practices of financial planners associated with the big banks.
In addition, it has proposed laws that will seek governance changes to industry super funds – some of the top performing funds in Australia and those used mostly by ordinary workers on low or middle incomes. The proposals require that a third of trustees on the board of a super fund should be independent. But the flip side is that it removes the requirement to have employers and members represented on retail super funds and reduces the Government’s obligations on these funds, many of which are operated by the big banks. Do you see the connection?
While on paper it may look as though the Government has finally done something to stop the rort of superannuation by the wealthy, the immediate implementation and back-dating of two of the measures could seriously affect the plans of those retirees who have successfully planned for retirement.
Firstly, putting a cap of $1.6 million on the amount of money that can be transferred into tax-free retirement phase accounts is fair enough – $1.6 million is a lot of money. But having it take effect immediately without giving people the chance to review their plans and expecting those who have already transferred more than this to make arrangements to move the money elsewhere, is frankly ridiculous. If I was lucky enough to be a wealthy retiree, I would be taking the extra cash and parking it in property – with negative gearing untouched and no changes to the discount on capital gains tax in the foreseeable future, who wouldn't? This will result in more pressure on the property market as well as adversely affect the Government’s forecasts.
Secondly, placing a lifetime cap of $500,000 on non-concessional superannuation contributions is a clever move for revenue building through the extra tax that will be paid. However, back-dating the inclusion of contributions made since September 2007 is unfair to those who have, over the last nine years, used the Government’s very own incentives to boost their superannuation.
Retirees and pre-retirees are already having to amend their retirement plans to accommodate the changes to the asset thresholds and the Age Pension taper rate that will take effect from 1 January 2017. To further throw their plans into disarray is just short sighted, especially by a Government that claims superannuation is ‘to provide income in retirement to substitute or supplement the Age Pension’.
Put simply, yesterday’s Budget 2016/17 has once again moved the goal posts and reduced retirees’ hopes of scoring any time soon.
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