The Federal Government’s decision to take an axe to superannuation concessions will severely dent the aspirations of Middle Australia who view their retirement savings as the key vehicle to achieve self-sufficiency in retirement.
Olivia Long, CEO of SMSF administrators Xpress Super and SuperGuardian, says the Government’s decision to take a short-term approach to superannuation will prove to have a long-term cost for people in their retirement years.
“SMSFs, in particular, are used by those people who are prepared to take responsibility for their superannuation, but with the measures introduced in tonight’s budget they will be wondering whether it is worth the effort.
“They rightly thought the system has been settled, especially when both political parties said in the run-up to the 2013 federal election that they were ruling out any significant changes to superannuation. But this clearly isn’t the case.”
Long singled out the Federal Government’s decision to reduce the concessional contribution from $30,000 for people aged under 50 and $35,000 for those 50 and over back to $25,000 is an ill-considered move that will especially hurt those who haven’t been able to save earlier in their working lives.
“All the research shows that people want till later in their working lives to top their superannuation. This is when they have the financial capacity to do so, and in one fell swoop the Government is making this that much harder. It will particularly fall heavily on women and those who have broken work patterns.”
Other decisions Long singled out as being backward steps for the long-term health of the super system are:
• Limiting tax-free earnings in retirement to account balances of $1.6 million. “Although I am hardly surprised by this measure, especially as it has Labor’s support in principle, the reality is it will prove a complex measure that will be hard to administer.
• Increased tax on concessional contributions for high income earners has been pushed down from $300k to $250k. “Again, this is hardly surprising, but to introduce it while reducing concessional contribution is a double whammy.”
• Removing tax benefits for people transitioning to retirement will hurt those wanting to work longer to boost their super – as well as likely to prove an administrative nightmare.