A key industry fund group has warned that the Government’s Budget home-owner downsizing proposal has opened the way for wealthy retirees to mis-use superannuation tax concessions.
In a submission to the Treasury dealing with the Budget’s housing related superannuation measures, the Australian Institute of Superannuation Trustees (AIST) said that while the downsizing proposal did provide an additional superannuation benefit to some people, it was not well targeted “and as such is not good policy”.
“This measure benefits homeowning Australians aged 65 and over who probably won’t be eligible to receive the age pension (because they have too many assets) and who are able to put $300,000 of the proceeds ($600,000 for a couple) into super,” it said. “The measure raises a number of issues.”
“Firstly, we note that the measure is exempt from the upper balance limit on non-concessional contributions, currently $1.6 million, as well as the annual limit of $100,000. This limit is designed to ensure that the concessionally-taxed environment of superannuation is not misused by Australians. Allowing an additional $300,000 on top of this is contrary to this policy.”
“Secondly, we note that this is exempt from the work test. Although AIST would welcome the removal of the work test as a relic of times where Australians retired earlier, this is in contrast to other Australians aged over 65 who need to satisfy the work test in order to contribute. We believe that this distinction is arbitrary and call once again for the work test’s removal.”
The AIST submission said that the measure also meant that Australians aged 75 and over could conceivably make an additional contribution – something which ran counter to the restrictions on Australians aged 75 and over making voluntary contributions.
“Finally, we note that there is very little discussion on the social security implications of this measure,” it said. “The policy intention is to make it attractive for members to downsize to a smaller residence, which would free up housing supply. Unfortunately, it also means that the proceeds from selling a larger residence would almost immediately become subject to age pension means testing.”
“The proposal would be better targeted if the downsizing amounts weren’t included in the age pension assets test,” it said.