The SMSF Association strongly opposes any move to reduce the general concessional contribution cap from $30,000 to $20,000 a year as part of changing the superannuation tax mix in this year’s Federal Budget.
Association CEO/Managing Director Andrea Slattery says the Government needs to step in now and rule out the speculation that a lowering of the current cap is being considered.
“Reducing the cap will critically undermine the superannuation system’s ability to give people the opportunity to save for a self-reliant, secure and dignified retirement.
“In particular, it is extremely relevant to people who have volatile incomes throughout their working lives, whether it be due to career breaks to raise children, broken working patterns, or because they own or work in businesses whose fortunes rise and fall with changing economic conditions.
“These people need adequate caps so they can maximise their contributions when they have sufficient income to do so in order for them to build their retirement savings throughout their working lives. Lower caps simply reduce their opportunities to save.”
Slattery says there’s also the critical issue of intergenerational equity for the retirement system, with any move to reduce the cap to $20,000 a year having negative consequences.
“Reducing the ability for people to make pre-tax contributions going forward unfairly hurts generations X and Y who have not had the opportunity to build their superannuation balances under the current rules.
“This shifts the burden of superannuation changes that are driven by Budget considerations on to future cohorts making their way towards retirement.”
The Association notes that the current general concessional contribution cap is much lower than the $50,000 (under 50 years of age) and $100,000 (aged 50 and over)
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caps introduced for the 2007-08 financial year. The current cap is $30,000 for people under 50 and rises to $35,000 for people 50 and over.
Slattery says the mooted change in the contribution caps is another example of a public debate about fiscal issues rather than a long-term debate about our future savings. This continues to erode the confidence of all Australians in the system.
“The super system encourages people to make long-term decisions to save for their retirement but short-term policy decisions driven by Budget considerations damage people’s ability to make long-term savings plans.
“We reiterate our position that the Government must enshrine the objectives of superannuation in legislation and seek more accurate measurements of the costs and benefits of superannuation to the economy before any significant changes are made to the system.
“Further, to avoid constant Budget driven speculation, superannuation policy should be taken out of the annual Budget cycle by tying significant changes to the superannuation system only after a longer-term review. The Intergenerational Report would be an appropriate vehicle to tie a periodic review of the superannuation system to.”
