Understanding the “objective” of super
Much was made of the government’s treatment of superannuation in the 2016 Federal Budget, which included a “tightening” of tax loophole related to transition to retirement pension accounts and changes to the rate of tax on super contributions.
But perhaps not as much attention has been given to an important point, which is the government’s decision to indicate a “clear objective” to superannuation.
The move to define the “clear objective” comes as part of a push from the 2015’s Financial System Inquiry (FSI) conducted by former Commonwealth Bank CEO David Murray. The 9th recommendation outlined in the FSI was for the government to, “Seek broad political agreement for, and enshrine in legislation, the objectives of the superannuation system and report publicly on how policy proposals are consistent with achieving these objectives over the long term.”
The government made good on this request in the budget, stating, “The Government will, for the first time, enshrine in law that the objective for superannuation is to provide income in retirement to substitute or supplement the Age Pension, as recommended by the Financial System Inquiry. This objective has been an important anchor for the development of the superannuation reforms.”
In a media release, Federal Treasurer Scott Morrison backed this position, stating, “These changes, which will generally take effect from 1 July 2017, will complement the regulatory reforms already being pursued by the Government to enhance the transparency, efficiency and governance of the superannuation system in order to improve confidence in the integrity of the system.”
In addition to outlining the clear objective, the government announced the following changes to superannuation as part of the 2016 Federal Budget:
- The introduction of a $1.6 million transfer balance cap on the amount that can be transferred to tax-free retirement phase accounts.
- A 30 per cent tax on concessional contributions for those earning over $250,000 per annum.
- A lower $25,000 annual concessional contributions cap.
- The introduction of a $500,000 lifetime non-concessional cap.
With an upcoming Federal Election scheduled for July 2, these changes are set to be highly scrutinised by the public and Federal Opposition alike.
In his budget reply speech, Opposition leader Bill Shorten said, “The Coalition's changes are chaotic and unprecedented. They were made with zero consultation. They dangerously undermine what's acknowledged as the world's best system for securing a decent retirement for all Australians.”
“The Treasurer claims only a small number of superannuation account holders will be affected. That's untrue. When the system is undermined, everyone is affected, everyone is at risk. Every single superannuation holder can now only guess what Malcolm Turnbull and Scott Morrison will do next.”
What do you make of the changes? Do you think it’s good that the government has outlined an “objective” to superannuation, and do you agree?
Let us know in the comments below.
Related links:
The winners and losers from the 2016 Budget
Budget 2016: How to beat the government at their own game
One billion dollars waiting to be claimed by Aussies