Watered-down changes to the concessional tax treatment of superannuation announced by Minister Bill Shorten have drawn a mixed response from the industry.
While government was warned against dipping into the superannuation honey pot by the opposition and a variety of organisations in recent weeks, the rule changes seem more of a thin smear than greedy dollop.
John Brogden, CEO of the Financial Services Council, last month issued a “hands-off” notice to government on superannuation, claiming any further taxes would be a breach of trust and revealing that the FSC would campaign to draw public attention to its view should its position go unheeded.
“It is good that the government has listened to the industry and general public and has announced its superannuation intentions before the budget. We look forward to working with the government on its implementation,” said Brogden of the proposed changes today. “We have shelved our advertising campaign for now.”
If anything, the package of proposals was as noticeable for what was left out and the government’s willingness to compromise.
A complex system
The Financial Planning Association (FPA) welcomed the government’s announcement and the establishment of the Council of Superannuation Custodians, designed to remove superannuation from the annual federal budget cycle and the political debate.
“Whilst we do not support increases in superannuation taxes we understand the changes are needed to obtain sustainability and certainty for the retirement system,” said Mark Rantall, CEO of the FPA.
The FPA also welcomed the governments decision to amend the excess contributions tax system and the increase in the concessional contributions cap to $35,000 from July 1 2013 for those aged 60 and over and from July 1 2014 for those aged 50.
“We further call for both sides of politics to commit to refrain from future changes to the super system so that Australians can once again obtain confidence and trust in their retirement nest egg.”
This appears to be unlikely in the immediate aftermath with Senator Mathias Cormann calling the package “complex changes to an already complex system”.
“Australians live in fear that Labor will once again raid super to pay for the Government’s reckless spending in the Budget,” he said.
“The Treasurer also announced today that he would establish a new Council of Superannuation Custodians to prevent future governments from making the same mistakes Labor has made over their five years in office.
“So the Labor Party tinkers with superannuation then pretends to set up a process to prevent further tinkering!”
Please consult
The FSC’s Brogden echoed Cormann’s view on the difficulties contained in some of the changes.
“However, the higher tax for pensions over $100 000 a year in retirement is complex and designed without industry consultation,” he said.
“It would require major changes to how super funds are managed to target only 16 000 individuals. So the government must consult on this measure.”
The SMSF Professionals’ Association of Australia (SPAA) CEO Andrea Slattery said the government’s pre-budget announcement had added certainty to the superannuation system – in sharp contrast to the speculation of previous months.
“In particular, SPAA welcomes the announced increase in the concessional cap for the overs 60s this year, and the over 50s next year, which will assist Australians close to retirement, particularly women and those with broken work patterns, through the ability to contribute and build a more dignified and self-sufficient retirement,” she said.
“SPAA has led the charge on this issue after the cap was reduced in the 2009 Federal budget, and in 2011 co-ordinated a joint industry letter calling on the Government to increase the concessional cap to $35,000 for individuals over 50.”
The Association of Financial Advisers (AFA) said the announcement went a long way to maintaining consumer confidence but is concerned that the measures may result in further complexity.
“We are very pleased that industry lobbying for an increase in concessional contributions caps has paid off,” said AFA CEO Brad Fox. “It will mean that more Australians will be able to better prepare for retirement.”
