Financial advisers have echoed concerns by the Australian Lawyers Alliance that super tax changes will impact those who are catastrophically disabled, calling on the Financial Planning Association (FPA) to lobby the Government over the matter.
Fiducian Financial Services adviser William Johns told Money Management that the FPA should advocate that the Government exempt the severely disabled from the 15 per cent tax on income streams.
People who become severely disabled can receive compensation payouts of several million dollars, easily generating an income stream of more than $100,000. Twenty-four hour care can cost more than $300,000 a year, and financial planners needed to be aware of that cost, he said.
It's not hard to reach that 15 per cent mark, he added.
Johns said he believed that the impact on the disabled was an unintended consequence.
However, while the Government does not require superannuation caps for funds placed in super from personal injury compensation payouts, they are now going to tax the super income streams from people who use these compensation payouts, Johns said.
The Government therefore has two conflicting policies, he said.
Eluvia managing director Mark O'Leary said that unless people received a very large compensation payout which was placed into an allocated pension, the disabled community would not be greatly impacted by the changes.
Trustees would have to have about $2 million in their super account to generate income streams of $100,000, he said.
