The Federal Budget has received a mixed response from the financial services industry with praise for tax changes aimed at bracket creep and the handling of superannuation being offset for criticism around the failure to address issues hanging over from the 2015 Budget.
The Australian Institute of Superannuation Trustees (AIST) welcomed some elements of the superannuation changes claiming they were a necessary step towards a fairer and more sustainable system but noted that nothing had been done to alter the 2015 Budget measures around the Age Pension Asset test.
AIST chief executive, Tom Garcia said the Government’s decision to rethink a super tax break for low income earners was a much-needed win, particularly for low paid women who faced many challenges saving enough for retirement.
He also welcomed the Budget measures to reduce overly-generous super tax breaks for very high income earners.
“Reducing tax concessions for those earning over $250,000 recognizes that a retirement income system where the top spectrum of income earners receive the greatest benefit from super tax breaks is neither fair, nor sustainable,” Mr Garcia said.
He said the AIST strongly welcomed the announcement that all Australians will now be able to claim an income tax deduction for personal contributions to superannuation.
However Mr Garcia said more needed to be done to improve fairness in super, noting that the changes to the Age Pension Asset – announced in the previous 2015 budget but due to come into effect on January 1, next year – would have a significant negative impact on part-pensioners.
The Financial Services Council (FSC) gave the Budget a qualified welcome, noting the proposed Budget changes to superannuation were designed to improve retirement outcomes for all Australians and backing the “positive measures that help women save for their retirement and extend the scope of superannuation to all Australians”.
However FSC chief executive, Sally Loane said the proposed restrictions on savers and retirees appeared to be counterproductive.
“The test for this budget is whether Australia will have more pensioners or more self-funded retirees,” she said.
“Australia needs more self-funded retirees. Many of these proposals appear counterproductive and we urge consultation to align budget measures with the objective of super.”
“The Budget lowers the concessional contribution cap to $25,000, introduces a new $1.6 million cap on accumulated balances and sets a $500,000 lifetime cap on non-concessional contributions.
The new caps and thresholds limit the capacity for Australians to save for their own retirement and will restrict retirees to an income of around $80,000 per annum from their superannuation. An $80,000 limit will fail to cover the costs of retirement for many Australians, when you include healthcare, aged care, and a comfortable standard of living.”