Pre-budget calls for contribution cap relief
The National Institute of Accountants (NIA) and the Tax Institute have appealed to the Government to relax the strict conditions around contributions caps in the upcoming Federal Budget.
The NIA called on the Government to raise the current cap limits, which it said were too low for older Australians looking to retire in the next few years, while the Tax Institute said the penalties for those who unintentionally breached the caps were too severe.
The NIA said that pre-2008 amounts should be reintroduced and that all older Australians should be able to access a higher contribution cap.
NIA chief executive Andrew Conway said Australians trying to maximise their retirement nest egg were most in need of Government support as they looked to make contributions above the superannuation guarantee level in the later stages of their working life.
If it was not possible to reintroduce the previous cap levels due to fiscal tightening, then Australians over 50 with low super balances should have other means of increasing their super, according to the NIA.
The Tax Institute stated that while the policy intent of contributions caps was correct, excess contributions made accidentally – sometimes by an employer rather than the taxpayer – could be taxed at up to 93 per cent.
Harsh penalties should apply to anyone trying to rort the system but the Government should change the legislation to ensure superannuation funds reject excess contributions without honest taxpayers being penalised, said Tax Institute senior tax counsel Robert Jeremenko (pictured).
Rules to reject excessive contributions can be combined with other integrity measures to ensure that caps are effectively policed, he said.
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