Who will benefit from the new super changes, what are the perceived flaws, and has the Government got it right? Here, the main players have their say about last week’s announcement.
Increased concessional contribution caps
The move to increase the contribution caps for those aged over 60 (or 50 from July 1st 2014), has been largely welcomed by major associations, but not everyone is convinced.
The FPA, AFA, SPAA and Deloitte have all welcomed the increase in contribution caps from $25,000 to $35,000. The cap has not been limited to balances below $500,000 as initially proposed, and Deloitte’s national superannuation leader Russell Mason, says “this will encourage additional savings, especially from middle-income earners who see retirement on the horizon and are in ‘catch up’ mode”. Small Independent Superannuation Funds Association (SISFA) has also encouraged the change, but said “it is a pity that the Government did not simplify things and make the $35,000 cap available to all over 50s from July 1st 2013”.
The Australian Institute doesn’t hold the same view. “Put simply, the wealthy can now get generous tax concessions on ‘voluntary contributions’ that are larger than the full-time minimum wage,” said the Institute’s executive director Dr Richard Denniss. The Institute of Public Accountants has welcomed the change, but says greater caps are still needed.
Earnings tax on superannuation income greater than $100,000
The new earnings tax has caused concern around the complexity and increased administrative demands it will bring. It will affect few Australians, and SISFA believes it will generate a comparatively small amount of revenue ($350 million) over the next four years. “You have to wonder whether introducing this level of complication into what is already a complicated system can have any beneficial, long-term effects.”
Deloitte has asked how this tax will be collected and expressed concern about the reporting expenses that will be borne by all members of super funds, not just those with high balances.
The reform will trigger tax consequences for asset transactions such as property sales, said SISFA. Assets purchased before April 5th 2013 will have until July 1st 2024 to ‘transition’. Apart from adding to administration costs, the changes will impact investment decisions of SMSF retirees; “the management of income and capital gains and when to crystalise gains will become much more complex with three different sets of rules to manage depending on when a fund acquired an asset.”
Excess contributions tax
Clients will be able to withdraw excess concessional contributions from super and be taxed at marginal rates with an interest rate penalty. SPAA CEO Andrea Slattery has welcomed the change, but added a note of caution: “We believe a similar refunding option should apply to excess non-concessional contributions as it is [these] breaches that usually attract significant excess contributions tax and the current options available to members who breach their non-concessional cap are grossly inadequate.”
SISFA said the approach will assist lower income earners but increase the tax take for top tax rate payers. Despite no change to the interaction with non-concessional contribution caps, SISFA predicts that the potential double-tax position for excess concessional contributions will be removed.
Government announces tax changes
Clients lose faith, SMSFs in trouble
Superannuation Council: Will it do the job?