3 May 2016
Budget package has significant ramifications for superannuation
The Association of Superannuation Funds of Australia (ASFA) acknowledges the significant announcements made on superannuation in tonight’s Federal Budget. The total package involves over $3 billion in net additional tax revenue being raised over the forward estimates period from superannuation contributions and investment earnings, and around 560,000 people will be affected by the changes.
“The changes to superannuation in the Budget go beyond redirecting tax concessions to those with low incomes and low balances, and limits the amount people can contribute to the superannuation system, which is still not mature,” says ASFA CEO Ms Pauline Vamos.
“In relation to specific measures, ASFA welcomes the introduction of the Low Income Superannuation Tax Offset (LISTO). This will provide a benefit of up to $500 a year for over 3 million people, of whom around two-thirds are women.”
ASFA has long advocated for support for low income earners contributing to superannuation. The LISTO scheme provides this and makes the superannuation system stronger.
While ASFA has previously supported a $2.5 million cap on balances that can be transferred to the tax free retirement phase, the Budget proposal for a cap of $1.6 million goes much further. A $2.5 million cap will have an impact on over 50,000 people, and involve additional revenue of under $500 million a year—while a $1.6 million cap will affect more than 100,000 people and result in additional revenue for the government of $1.15 billion by 2019/20. ASFA will need to do work to understand the impact on retirement incomes.
“We do not support the reduction of annual concessional caps to $25,000. While today less than 2 per cent of people (around 255,000) with superannuation make contributions above $25,000, a significant number of such individuals that have low balances are attempting to catch up. For instance, around 36,000 women with balances less than $200,000 in 2013/14, were making contributions in excess of $25,000.
“The changes to the flexibility caps will allow women, in particular, who currently retire with less than half the superannuation of men, to catch up. However, the restriction of a five year period for the calculation of previously unused cap amounts restricts the effectiveness of this.”
It will be important for the government to consult on the implementation of a number of the measures. Some of the measures have the potential to significantly increase administration costs of funds. Such costs would likely be passed on to all fund members, not just those directly impacted by the changes.
“There is a lot in these announcements. We will need time to assess their impact and fully understand the consequences,” concluded Ms Vamos.
For further information, please contact:
Katrina Horrobin, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.