The Self-Managed Super Fund Professionals’ Association (SPAA) has called for the restoration of superannuation contribution caps to pre-2009 levels and for sensible solutions for those who inadvertently breach them.
In its 2011 Budget submission, the SPAA noted the increase in the instances of those inadvertently exceeding their contributions caps and incurring excessive Excess Contributions Tax since the 2009 Budget, when the concessional superannuation caps were halved to $25,000 a year for those under age 50 and $50,000 a year for those aged over 50.
“It is now widely recognised that the punitive penalty regime applying to excess superannuation contributions is in need of reform,” said SPAA chief executive Andrea Slattery. “The severity of Excess Contributions Tax, both in terms of the rate of tax and the manner in which tax is applied, is a significant issue currently confronting the sector.”
Slattery noted that self-managed superannuation fund (SMSF) members were disproportionately affected by the tax due to their high engagement with their super and the higher likelihood that they would take advantage of opportunities to increase their retirement savings.
"The reduced concessional contribution caps, together with the absence of adequate indexation, will deny many thousands of Australians, who typically have a greater financial capacity to save for their own retirement later in life, the opportunity to do so,” she said.
The SPAA stated that in principle it supported the Government’s proposed permanent restoration of the $50,000 a year cap for the over 50s from 2012-13. However, it did not believe the measure should be restricted to those with a less than $500,000 superannuation balance as it would “only impose difficult, onerous and inefficient administration and reporting practices on funds, reminiscent of the previous reasonable benefits limit regime”, Slattery said.
She added that the SIS Regulations should be amended to enable the voluntary refunding of the excessive portion of a non-concessional contribution back to the member, to enable members to minimise their excess contributions tax liability. Further suggestions in the submission included the removal of the restriction that applies from age 65 to members who wish to bring forward two future years of non-concessional contributions, allowing the bring-forward rule to apply until age 75.
The submission also called for adult children to be able to receive a superannuation death benefit from a parent tax free if it is left in an accumulation superannuation fund and not cashed out.
