Treasurer Scott Morrison has made changes to the federal government’s proposed superannuation reforms after months of internal party pressure, with a proposed $500,000 lifetime non-concessional contribution cap replaced by a reduction of the existing annual cap.
Treasurer Scott Morrison has made changes to the federal government’s proposed superannuation reforms after months of internal party pressure, with a proposed $500,000 lifetime non-concessional contribution cap replaced by a reduction of the existing annual cap.
The annual cap will be lowered by $80,000 to $100,000, while individuals with a superannuation balance above $1.6 million will not be able to make after-tax contributions from the start of next financial year.
That move will cost $400 million across the forward estimates.
In order to fund the additional cost of the move, harmonisation of contribution rules for people aged 65 to 74 will not proceed, while the flagged introduction of catch up concessional contributions will be delayed a year, to July 2018.
In net terms, the new package will save an additional $180 million across the forward estimates and $670 million in the decade to 2026-27.
The new package has been approved by cabinet and the coalition party room.
It is the second budget win in two days for the government, with the Labor opposition yesterday accepting a $6.3 billion package of spending savings.
Mr Morrison said the measures were intended to ensure concessions weren’t used as a tax incentivised estate planning vehicle.
“Implementing our changes to superannuation that we announced in the budget to make tax concessions more fit for purpose has also been a key focus of the Minister and I in recent months since the election,” he said.
“The purpose of these tax concessions is ... to provide income in retirement to substitute or supplement the aged pension.
“These measures remove any remaining impediment or barrier for the government's budget superannuation package to now receive bipartisan support in this parliament.
“This morning I've spoken to the Shadow Treasurer, Chris Bowen, and outlined these measures to him and offered him and his team a full briefing from officials to be fully informed of these changes.
“Legislation for all measures will be introduced by the end of the year.”
Revenue and Financial Services Minister Kelly O’Dwyer said the government had gone through an extensive consultation process and that stakeholders had wanted flexibility.
“It's very important that we make sure that we can continue to provide catch up contributions for those people who might have been out of the work force because they are caring for an elderly parent or because they might have had a child or had parental responsibilities,” she said.
“We have the ridiculous position today where somebody who works for a small business that doesn't offer salary sacrificing cannot take advantage of their full concessional contribution.
“Somebody who is part-employed on a salary and who also might have their own business ... cannot take full advantage of their concessional contribution.
“(These changes) are critical flexibility measures that mean that we level the playing field so that everyone in Australia who wants to be able to contribute to their super, who wants to be able to increase their retirement balance, who wants to be able to have the best possible retirement, can in fact do so.”
