The Federal Government's changes to superannuation could result in a significant outflow of funds from the super system as people with high balances seek to avoid the impact, according to a roundtable of top superannuation industry and financial services executives.
The roundtable, conducted immediately after the Treasurer, Wayne Swan and the Minister for Finance, Bill Shorten, announced the changes centred on earnings on assets supporting income streams being tax free up to $100,000, with earnings above $100,000 being taxed at the same concessional rate of 15 per cent in the accumulation phase.
State Super chief executive John Livanas told the roundtable that a genuine risk existed that implementation of the changes would result in significant outflows form superannuation funds.
As well, Australian Institute of Superannuation Trustees (AIST) chief executive Tom Garcia agreed that a risk existed and that if such outflows occurred they could impact fund liquidity.
"The biggest concern is the unintended consequences," Livanas said. "A lot of thinking has to be around the likely reaction. The moment confidence reduces [in the super], the question as to whether to commute pensions come into question."
Energy Industry Super chief executive Alex Hutchison said he believed the changes would genuinely prompt some people with higher superannuation balances to consider options other than super.
"More people will change their affairs to negatively gear and go into property," he said.
Livanas said he believed that when the experience of the superannuation surcharge introduced in 1996 was taken into account, there was a huge risk of outflows.
"It's a huge risk," he said. "You saw what happened in ‘96 with the surcharge. Every time you have tinkering or change [with the system] you open a set of decisions that might not otherwise have been open to consideration."
Deloitte partner Russell Mason said many people would regard the tax as retrospective in view of the fact they had pushed money into superannuation because they had been encouraged by Government to believe it was the right thing to do.
"They did so legitimately. If I was one of those people I would feel aggrieved," he said.
