Planner bodies welcome contribution cap increase but reject tax rate hike
The Association of Financial Advisers (AFA) and Financial Planning Assocation (FPA) have welcomed the passing of legislation in the House of Representatives which increases concessional contribution caps for older Australians, but has expressed reservations around the increase in superannuation contributions tax for higher income earners.
The House of Representatives yesterday passed the Tax and Superannuation Laws Amendment (Increased Concessional Contributions Cap and Other Measures) Bill 2013 which increases the concessional contributions cap for those over 60 to $35,000 from 1 July this year. From 1 July 2014 the new cap will also begin to apply for those aged 50 and over.
AFA chief executive Brad Fox said the increase would allow older Australians to better prepare for retirement and was a welcome move, since older workers did not have the beneficial effects of the Superannuation Guarantee Charge throughout their working lives.
“This measure will be very beneficial for those mature Australians who have the capacity to take advantage of it. However, while we are pleased that the legislation has been passed, we would prefer to have seen the higher cap for older Australians introduced as a permanent measure through indexation, rather than as a short-term measure,” Fox said.
FPA policy and government relations general manager Dante De Gori said while the FPA welcomed the increase it still believed the cap should be returned to $50,000 and the indexation freeze applied should be removed.
“With the freeze the cap of $35,000 will go out of date very quickly and post-September we will continue to encourage the Government to see a higher cap as a long term benefit to the country,” De Gori said.
SMSF Professionals Association of Australia (SPAA) also supported the move stating it follows four years of advocacy work since the concession caps were cut in the 2009 Federal Budget, but would work for higher cap levels.
“SPAA has always understood that the higher caps were a key issue for Australians wanting to plan their retirement. We have been advocating higher concessional contribution caps since the 2009 Federal Budget when they were cut. In 2011, we co-ordinated an industry-wide letter and supporting submissions asking the Government for a $35,000 cap for people over 50 years of age - and we will continue to advocate strongly for even higher caps,” SPAA chief executive Andrea Slattery said.
Fox said the AFA still held reservations about the doubling of the contributions tax rate for Australians earning over $300,000, which also passed through the House in the same bill, stating it would not support the increase.
“While we appreciate the current budgetary pressures on the Government, we don’t support this measure which acts as a disincentive for superannuation contributions and increases the overall complexity of the Australian superannuation system.”
De Gori said both moves were also short term measures that did not fit within the larger long-term retirement goals of the superannuation system and superannuants and their planners wanted some calm and longer term solutions surrounding retirement income funding.
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