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The $500,000 superannuation account balance limit for investors making $50,000 contributions into their super should be scrapped, according to the senior manager of superannuation at HLB Mann Judd, Neil Howard.
Speaking at an HLB briefing in Melbourne on tax and superannuation, Howard questioned why the Government had only allowed those with super balances of less than $500,000 to make super contributions of up to $50,000 every year.
“[The Government said] we will reinstate the $50,000 super contribution cap for the over 50’s, but you have to have an account balance of less than $500,000 to make the extra contributions. And the $500,000 is just an arbitrary figure that’s been plucked out of the air, there’s no rhyme or reason to it.”
“Why have a cap on an account balance in the first place?” Howard asked.
Howard said the account balance cap was an attempt to force more money back into salaries, making them liable for more tax.
“What they are saying is that if you have an account balance of more than $500,000, you don’t need to contribute more than $25,000 a year, which is ludicrous.”
The Government was using the contributions cap to force people to fund their retirement throughout their working lives, but young taxpayers don’t have $50,000 super contributions to make early in their working lives, Howard said.
They only tended to “top up” with super contributions towards the end of their working life, after they had gotten rid of school fees and the mortgage, he said.
Howard also labelled the superannuation changes as piecemeal and said there was nothing consistent about the Government’s approach.
“One of the things that Henry recommended was that super contributions by employers be taxed at an individual’s marginal rate … with a tax offset up to the $25,000 cap. The Government hasn’t acted on that. That again is something that’s on the backburner.”
