The Federal Government has recommitted itself to raising concessional caps on super contributions for over-50s, and restated its commitment to preserving the unique nature of the self-managed superannuation funds (SMSF) sector.
The Assistant Treasurer and Minister for Superannuation and Financial Services, Bill Shorten, told the 2011 Self Managed Super Fund Professionals’ Association of Australia (SPAA) national conference that while Australia’s retirement saving system was the fourth-largest in the world, we ranked only seventh in terms of retirement income adequacy.
“This Government is committed to increasing compulsory superannuation; we also are committed now to increasing the concessional caps for superannuation,” Shorten said.
“At the moment, Australia is the fourth-best nation in the world in terms of funds under management. But we only come seventh in the world in terms of adequate retirement income systems. In other words, while we’re doing alright getting money under management, our retirement income system needs to be better. One of the things that we are proposing to do, from 2012, is if you’re over the age of 50…we’re saying we want to lift the concession so you can put $50,000 a year in, and it’s taxed concessionally.
“I accept that some of you think there shouldn’t be any concessional caps at all, and I can see that argument. But let me also say that we’re also trying to do something at the other end of the market. For people earning less than $37,000 a year, I worry what’s going to happen to them when they turn 60 and 65 and retire. Sure, there’s the old-age pension, but that is not enough. So we’re going to support people who earn less than $37,000 a year and put in up to $500 for their super – basically abolish the concessional tax. So if you earn up to $37,000 a year, you’ll be basically paying no tax on the money you put into super, which is a good thing.
“The other thing which we are intending to do, as I’ve said, is move super from nine to 12 per cent.”
“All of the various forms of superannuation, in the opinion of the Government, have all got their own beauty”
Shorten’s announcement was welcomed by SPAA. The chairman of the association, Sharyn Long, said the Government is “committing to their existing policy to lift the contribution caps for people over 50 with balances of less than $500,000”.
“I don’t think it was a broader ‘We’re committed to increasing the caps and restoring them back to previous levels for everyone’,” she said.
The chief executive of SPAA, Andrea Slattery, said the association would still like to see “a broader cap change, so that caps are actually raised again to the pre-1999 Budget levels – of $100,000 for the over-50s and $50,000 for the under 50s”.
“And if that wasn’t the case we’d like to see the half-million dollar limit removed,” she said. Slattery said she believed SPAA was receiving a fair hearing on these issues.
“I believe that we’re being well heard, and I believe that our policies and our solutions … are very sensible and they’ll provide integrity in the marketplace,” she said.
“And so we’ll continue to get a good hearing, and hopefully our voice will be heard.”
Long said that “particularly on the $500,000 issue for people over 50, and how that’s valued and what time it’s valued and at what point you can make contributions, I think we’ll have consultation over that and we really look forward to that”.
Shorten said that lifting the contributions caps would help alleviate some of the issues that have emerged recently relating to excess contributions tax. And he said that lifting the caps was “contingent on passing on the MRRT (Mineral Resource Rent Tax) – but that will happen”.
And he said that raising the compulsory super contribution level from 9 per cent to 12 per cent was dependant on receiving the support of the Independents.
“I’m not saying they’re across the line on it,” he said.
“But it’s a good idea. Ultimately, a good idea is hard to defeat. And who knows, maybe the Coalition will have a change of heart.”
Shorten told the conference that there recently had been “a bit written about self-managed superannuation funds; indeed the Treasury Department said self-managed superannuation funds were some kind of tax instrument as opposed to being about all the other purposes [aimed at maximising] saving adequacy in retirement”.
“So I wanted to say this: the current Gillard Government does not believe that SMSFs are illegitimate. We believe in Australia that if you save money for your retirement, you should have the ability to choose the method by which you take your own precautions and steps to preserve tour income when you retire.
“What I mean by that is, if you want to be in a retail fund or an industry fund or if you’re in a public sector or a corporate fund or in an SMSF, it is not a beauty parade as far as the Government is concerned. All of the various forms of superannuation, in the opinion of the Government, have all got their own beauty.”
Shorten said that governments in Australia “can’t win elections by having good superannuation policies, but if you do not have a good superannuation policy in Australia, if you’re a political party, then you shouldn’t be in government”.
“This Government, I’m going to make this point and how you vote is up to you, but if you think superannuation is important, I’d just make this point: we want to increase super from 9 to 12; we want to increase the concessional caps. We…think that the Henry tax review, where it said you can pay your full tax on super and then you get it back in tax rebates – and that’s the Liberal policy – we think that’s a clunky, messy system.
“If I’ve got one message I tell the other Cabinet ministers in Canberra, it’s that superannuation should always be concessional. If it’s compulsory, it should be concessional. The other thing that we need to do is take away the tax uncertainty of it. We need to – to put not too fine a point – we need to stop monkeying around with the tax treatment of superannuation, so people in their 20s and 30s can have some certainty that as a tax planning tool, superannuation will not change.
“We think the system should be concessional, it should be compulsory, it should be more than 9 per cent – anyone who stands in the way of moving it to 12 and beyond, you’ve got to ask them what are they earning in super? I want the whole of Australia to be able to retire one day and not go back to living in poverty for the last 30 years of their life. And rest assured, this Government does respect SMSFs. That’s why I’ve bust a gut to be here and bale up your drinks, because I do believe that SMSFs are an important part of the strength of the Australia superannuation system.”
