Groups lobby against contributions tinkering
Means testing for super members over 50 would be a failure on behalf of the Federal Government to address two of its three main policy objectives (lower revenue costs, simplicity and fairness), according to Macquarie Advisers Services technical manager and director of the Self-Managed Super Fund Professionals’ Association of Australia (SPAA), David Shirlow (pictured).
Superannuation experts continue to lobby the Federal Government to rethink its proposals to raise the concessional contribution caps (CCC) for those aged 50 and over who have superannuation account balances of $500,000 or less, and to enable those who exceed the CCC for the first time to have their excess contributions of up to $10,000 refunded and taxed at the marginal rate.
Shirlow said the means testing proposal was likely to incur extensive administrative complexity and cost, and was possibly a failure of the fairness objective. He added that it failed to take into account individuals’ lifetime patterns as well as the tax treatment that has been applied to contributions previously made. The $500,000 threshold also sent out the wrong message that it was an appropriate amount to save, he said.
SPAA national technical director Peter Burgess said SPAA did not support means testing, asserting that the caps should be raised for everyone over 50. He added that over time the caps should be raised for everyone.
SMSF specialist at Heffron, Meg Heffron, said the proposal would either make the system too complicated, or would result in people rorting the system.
“If they stopped obsessing so much about people getting too much out of the system, and allowed that cap to apply to everyone over 50, life would be so much simpler,” she said. “I wonder how much tax revenue is at stake to make it worthwhile putting in place such a complicated system. “
Shirlow believed the proposal also exacerbated the excess contributions tax issue, since added complexity would lead to more contributions mistakes being made. However, he felt that the $10,000 gap proposal was a good measure because it solved the vast majority of contribution cap issues.
Burgess said this second proposal was a start but did not address the number exceeding their non-concessional contribution caps (NCC). He said there was no announcement in the Budget proposing that the Australian Tax Office be given more room to show discretion where genuine mistakes were made.
SMSF specialist at Cavendish Super, David Busoli, said the main problem with the NCC was the hefty tax penalties incurred and the lack of a refunding mechanism. Heffron felt that penalties were not the issue but rather the mechanics of how the concessional and non-concessional caps have been structured and how the three-year bring-forward rule can be triggered.
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