The Federal Government has been urged to stand firm on those elements of its Budget superannuation changes targeting tax concessions to upper income earners but to remove any elements of retrospectivity and to restore concessional contribution caps to previous levels.
Superannuation ratings house, SuperRatings, has urged the Government to stand firm and not “suddenly collapse in a heap to appease all of the ‘NIMBYs’, which in turn will be to the detriment of the large majority of Australians”.
It said that after analysing the key proposed change of introducing a Pension Cap, SuperRatings had calculated that even after the proposed change, a couple would be able to generate tax-free earnings from up to $5 million in savings.
Commenting on the analysis, SuperRatings founder and chairman, Jeff Bresnahan said: “If a retired couple can generate over $225,000 in tax-free earnings per annum from their existing capital in the current low rate environment, and our elected representatives would consider giving them more, then we have completely lost the plot”.
According to Bresnahan, the $1.6 million cap should be the least controversial of the Budget changes.
He said there were arguments that many people have saved well in excess of $1.6 million in their super funds and that it would be unfair to start taxing these amounts.
“What was unfair was that the then Treasurer, Peter Costello, abolished tax on pension assets way back in July 2007 and by doing so created an ever growing black hole in the economy. What is now unfair is that the extremely wealthy are the only ones who have benefited from this change and claim the proposed cap will eat into their standard of living,” Bresnahan said.
Dealing with retrospectivity, the SuperRatings analysis said the $500,000 lifetime non-concessional cap required a “cautionary” approach.
“Whilst it too makes complete sense to prevent a small minority of ultra-wealthy from continuing to stash significant sums into a highly concessionally taxed environment, it would also be the first ever retrospective legislative change introduced into the superannuation industry,” it said.
“This precedent could, quite rightly, mean that nothing is sacred going forward. Whilst super has been the plaything for politicians for almost 25 years, incredibly, no party has ever introduced retrospective legislation.”
