The SMSF Association has raised its strong objection to any moves by the federal government to cut the non-concessional contributions caps from the current level of $30,000 to $20,000 as part of this year’s budget.
“Reducing the cap will critically undermine the superannuation system’s ability to give people the opportunity to save for a self-reliant, secure and dignified retirement,” SMSF Association chief executive Andrea Slattery said.
“In particular, it is extremely relevant to people who have volatile incomes throughout their working lives, whether it be due to career breaks to raise children, broken working patterns, or because they own or work in businesses whose fortunes rise and fall with changing economic conditions.
“These people need adequate caps so they can maximise their contributions when they have sufficient income to do so in order for them to build their retirement savings throughout their working lives.
“Lower caps simply reduce their opportunities to save.”
Slattery also pointed out such a move would severely impact on intergenerational equity within the superannuation system.
“Reducing the ability for people to make pre-tax contributions going forward unfairly hurts generations X and Y, who have not had the opportunity to build their superannuation balances under the current rules,” she said.
“This shifts the burden of superannuation changes that are driven by budget considerations onto future cohorts making their way towards retirement.”
She added the most recent proposed change to the system on fiscal grounds only served to further undermine public confidence in the retirement savings system and as such strengthened the argument for defining the purpose of superannuation in law.
“We reiterate our position that the government must enshrine the objectives of superannuation in legislation and seek more accurate measurements of the costs and benefits of superannuation to the economy before any significant changes are made to the system,” she explained.
“Further, to avoid constant budget-driven speculation, superannuation policy should be taken out of the annual budget cycle by tying significant changes to the superannuation system only after a longer-term review.
“The Intergenerational Report would be an appropriate vehicle to tie a periodic review of the superannuation system to.”