The SMSF Owners’ Alliance (SMSFOA) has warned the federal government’s approach to superannuation reform and Labor’s latest backflip on super have created a loss of faith and confidence in the system.
“It does not make economic sense to curtail people’s ability to save for the future to pay for recurrent and chronic overspending by governments,” SMSFOA executive director Duncan Fairweather said.
“On superannuation policy, politicians often say ‘just this change, then no more’. That is, until the next time.
“Whatever changes Parliament adopts in the next month, they will encourage rather than discourage future governments to keep fiddling with super and raiding it periodically to pay for continued excessive government spending.
“Unfortunately, the government’s simplistic objective for super, which positions superannuation as just an adjunct to the age pension, leaves the door wide open to the continual whittling back of superannuation benefits by future governments. No wonder people are losing faith in the superannuation system.”
Yesterday, the federal opposition called for changes to the super tax concessions before the final legislation was introduced to Parliament.
Labor treasury spokesman Chris Bowen said the ALP wanted to lower the annual non-concessional contributions (NCC) cap from the proposed $100,000 to $75,000.
In addition, Bowen said it wanted to lower the high-income super contribution threshold to $200,000 and scrap catch-up contributions and tax deductions for personal contributions.
Fairweather said: “It’s open season on super as the Labor Party tries to outdo the government in cutting back the benefits of superannuation.
“Labor is trying to seem tougher than the government on Australians who have worked hard and saved hard to achieve financial independence in retirement.
“Remember, NCCs are those on which full income tax has been paid. They are optional savings by people who want to boost their super so they can enjoy a comfortable retirement without having to draw the age pension and impose a cost on the following tax-paying generations.
“Reducing the annual non-concessional allowance will affect small business people who plan to sell their business and boost their retirement savings, and homeowners who plan to downsize and put the proceeds into super.”
Faced with the prospect in retirement of a new tax on super earnings above a $1.6 million balance cap and the reimposition of capital gains tax on assets above the cap, people looking to sell their house and downsize might change their plans, he said.
“The more superannuation is taxed and limited, in contrast to a tax-free house, the more likely it is that people approaching retirement will decide to stay put,” he said.
“By not releasing their house to the market they will constrain supply and maintain the upward pressure on housing prices.”
Yesterday, Revenue and Financial Services Minister Kelly O’Dwyer said Labor’s super tax grab would thwart people who were in and out of the workforce from catching up on their super contributions.
“Our changes will help women who may have taken time out of the workforce to raise children or to care for a family member,” O’Dwyer said in a statement.
“They will also help people with irregular income patterns, such as farmers, as well as small business people and their employees by allowing them to claim a tax deduction for personal super contributions.”
By contrast, Labor’s changes would prevent people in those cohorts from having the opportunity to build their super balances, she warned.