Higher contribution caps should be implemented for individuals over the age of 50 and the retirement income system as a whole should be simplified in order to encourage Australians to save more for their retirement, the SMSF Association has said.
In its Retirement Income Review submission, the association highlighted the importance of personal contributions towards retirement and said individuals over the age of 50 should be allowed higher contribution caps to ensure they had sufficient funds saved before they reached retirement.
“The lead-up to retirement (beginning around age 50) is a critical time period for individuals to plan and grow their retirement savings. These are the final years of full-time work and provide the greatest opportunity with an intersection of financial capability and proximity to retirement,” the SMSF industry body stated.
“The significant impact that personal contributions can have on superannuation balances at retirement should not be underestimated. The restriction of concessional contributions to $25,000 not only lowers retirement savings, it encourages individuals to consider other forms of tax-effective retirement planning, such as investment bonds or negatively geared property investment.”
In addition, it pointed out the current complexities of the retirement income system were a major hurdle for Australians who might otherwise consider making more voluntary contributions.
The many age restrictions on contributions and work tests, as well as transfer balance caps, general transfer caps and total superannuation balances, were discouraging individuals from saving for their retirement, it said.
It also noted current estate and death benefit rules were another complex area within the system that played a role in deterring individuals from making appropriate retirement savings decisions.
“Encouraging all retirees to become more self-reliant by saving more for their own retirement should be an objective of the retirement income system. The burden on a declining taxpayer base would be significantly eased if all retirees could be encouraged to save more prior to retirement,” it said.
“We believe superannuation policy should incentivise and encourage Australians to take ownership of their retirement planning and contribute to their superannuation accordingly. For those individuals over 50 the policy settings should be improved.”
It also repeated its call for changes to be made to the residency test applied to SMSF trustees who are overseas, a position it first outlined as part of its 2020/21 budget submission to Treasury.
