Government passes superannuation changes to save nearly $3 billion 8

Superannuation

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The government has announced new changes to the super.

Superannuation has been a great way to hold funds while paying minimal or even no tax, rather than the higher marginal rates of personal income tax. And that has been done for a good reason – to encourage saving for retirement. Now, the Federal Government has passed its changes to the superannuation system claiming it will save nearly $3 billion and future proof it for decades to come.

The Government will impose a $1.6 million cap on the amount of tax-free super savings a person can hold in retirement from July next year. After-tax contributions will also be capped at $100,000 a year. While many welcome the move and agree that a total of $1.6 million in tax-free super is a pretty generous amount to retire on, others say that they want to be able hold assets on a tax-free or low-tax basis so they can enjoy what they’ve worked their whole lives.

Treasurer Scott Morrison said the reforms were the most significant changes to superannuation in more than a decade and were fair, necessary and sustainable, reports ABC.

“This represents the most significant change to protect the flexibility and ensure the sustainability of superannuation in more than a decade,” he said.

“It will enable the system to be future proofed.”

The Government faced internal political pressure after first introducing changes to the superannuation system in the 2015-16 budget.

The Treasurer initially planned to impose a $500,000 lifetime cap on after-tax super contributions made since 2007, but faced a backlash from Coalition backbenchers.

Some Liberal donors said they were so annoyed by the proposed measures that they would refuse to bankroll the Coalition’s July re-election campaign.

The compromise was welcomed by some superannuation groups, but criticised by the Combined Pensioners and Superannuants Association, which claimed the Government had caved in to the super rich.

The Treasurer said the Government had been upfront with the Australian people and listened to feedback from the community.

“We had to make the case and make the argument and we had to take it through the Parliament with our colleagues and work through all of those issues, but that’s the work of Government,” he said.

“It needed to be fairer, it needed to be more flexible.

“It needed to be more sustainable. We took the difficult decision to go and pursue that. And we took it to an election.”

Revenue and Financial Services Minister Kelly O’Dwyer said the changes would “level the playing field” for more than 800,000 Australians, who will be able to take advantage of their concessional contribution cap from July next year.

The cap on tax-free pension accounts is aimed at the very top end of the market, and that’s about 1% of super members.

What do you think of these latest changes in the super? Will you be affected?

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  1. It is all well and good to address the Super of retirees it is about time they had a look and how they are ripping off their own super system payments, we hear about their massive payments when they retire but nothing changes. It is do as I say not do what I do.

  2. I generally agree with the changes. They shouldn’t affect the average person with money in super However, it would have been much better had they abolished the “work test”. A lot of retirees want to downsize and top up their super with the proceeds from the sale of their family home but it is a real disincentive when you have to be working in order to do this.

  3. These compromised superannuation changes were far too weak and appeared to
    only really favor the rich superannuation holders. The cap should have been only
    $1.2 million rather than $1.6 million. At $1.2 million it would still be returning
    $72,000 pa even at a minimal rate of 6% pa. … with very little taxation obligations too.

    1 REPLY
    • Guy Flavell, Can you please let me know from where I can get a return of 6%. I am well qualified in Economics & Business, but I am still to find out who pays 6% return. I am in to investments of property. After paying the Agent, Insurance, Rates etc, the return is about 4% I have some funds in Term Deposits at 2.7%, but definitely not 6%. In 2008, St. George Bank paid 9% for Fixed FIVE Year Term Deposits, but not anymore. Not long ago, the Super Funds, went backwards, and it took about 5 years to recover. At present, the economy is at a stand still, and the foreign debt is over $1 Trillion. If the return is $72,000 for a couple, they get about $37,000 tax free & the balance $35,000 is taxed at 19%, including the medicare levy, which will leave only $2513 a fortnight. Those who are non home owners, without any assets, receiving full pension will get over $2000 a fortnight, including rental allowance. Liberals wants only two things. That is to destroy Superannuation and Medicare, as they are the only worthwhile things achieved by the parliament in the last 60 years, and it was done by LABOUR PARTY. Liberals did only one thing. That is to bring a GST, now trying to increase it to 15%. Malcolm Turnbull said, about a week back “Some people will gain & some will loose” with their agenda to boost the economy. The best place to start it is the absurd current benefits to the MPs & Senators, and set ONE superannuation & retirement age, to all in the country, including the parliamentarians. Then there will not be any Joe Hockeys receiving a pension at 51 years, while earning another $400,000, plus having millions of assets.

      1 REPLY
      • Thanks Truth 13 for your comprehensive and thoughtful response. I agree with much of
        what you say, apart from a couple of doozies, ie:
        1) $2513 per f/n is FABULOUS income for a retired couple. It infuriates me that much of the whinging
        seems to come from this sector of our retirees.
        2) My own, non-home owning income as a pensioner is $875 p/f … NOT $2000 (golly, I wish).
        I estimate the value of ALL my free pensioner benefits to be no more than $150-$200 per f/n.

        3) Averaged over say a 10 year term, the actual returns on property investment or quality investment
        funds is undoubtedly 6% minimum. You’ll be the first to agree that it’s all just ‘swings and
        roundabouts’ in the investment industry.

        I heartily agree with your comments on the outlandish benefits and allowances enjoyed by our past and current Pollies.

  4. Why always attack those who do the right thing, and reward those who contribute nothing to society! Sick of being penalised, and being the cash cows for lazy, self- centered politicians, and the bludgeons who hang off them. Superannuation is a person’s retirement savings, and not a pot of gold to support those who haven’t made that sacrifice!

  5. I wish I hadn’t bothered saving for my old age. Never dined out, thought before I bought anything. I should have copied my friends who would breakfast out every Saturday morning. Had takeaways often, coffee at cafes and bought new clothes or cars when they felt the need. Who Is the Idiot? Me of course.

  6. What has not been mentioned in this article is the treatment of unfunded defined benefit pensions and the multiplier to be used to convert the unfunded pension to an equivalent tax-free super savings. The rules regarding the treatment of unfunded defined benefit pensions pension have completely changed since I retired and the government should have included grandfathering provisions.

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