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A focus on broader superannuation policy has left a number of the technically challenging details introduced in the Better Super package unresolved, according to Macquarie Adviser Services executive director David Shirlow.
Many superannuation fund members have been caught out by the rules relating to contribution caps introduced in 2007.
Shirlow agreed there is a consensus among superannuation technical specialists that some improvements could be made to the existing contribution cap rules. Shirlow also believes amendments could be made to various tax rules governing insurance in super, particularly for death and disability insurances.
“There’s been so much focus on broader policy issues in super with the Henry and Cooper reviews being conducted that issues around technical difficulties with the Better Super packages have taken a bit of a back seat,” Shirlow said.
“I think at some stage in the next few years ideally we’d start turning our minds to some of those issues, but it’s pretty difficult given the length of the policy agenda. I think the industry will probably need to be patient.”
Shirlow said the Investment and Financial Services Association had made a submission to Superannuation Minister Chris Bowen seeking “at the very least some transitional relief for [contribution cap] problems on the basis that significant volumes of people were caught out by the new rules and the way they operated”.
“Beyond that we’ve been exploring practical adjustments that could be made to the rules which might reduce the extent to which people are going to have excess contributions or the extent to which they’re going to be stuck with them.”
Shirlow suggested one option open to the Government would be to broaden the range of circumstances in which superannuation funds could repay excess contributions. Currently funds can only repay an excess contribution if the cap is exceeded in one hit, and the excess must be repaid within 30 days.
Shirlow proposed funds be able to volunteer to aggregate member contributions over the relevant year, allowing them to pay back excess contributions on an aggregated basis.
Shirlow is confident technical adjustments will be made to the Better Super package over time.
“What’s difficult to predict is the extent of the adjustments and whether rules are changed in any substantial way or whether they’re just tweaked at the edges.”
