Tax and Super Australia has expressed its opposition to introducing a superannuation balance cap as the move would add unnecessary complexity to the system and adversely affect individuals’ willingness to plan for their retirement.
“Changing the law will undermine consumer confidence in the superannuation system. Australians must be reassured by the stability of the superannuation system from not seeing any further major changes. This will allow them to better plan their retirement strategy knowing the rules won’t change over the short or long term,” Tax and Super Australia head of superannuation Natasha Panagis noted.
The federal government has expressed its concerns about the fact some SMSF members have $100 million or more accumulated in their super funds, but Tax and Super Australia technical and policy chair Phil Broderick pointed out this is actually only a tiny group of people.
“This small cohort of large account balances are the exception rather than the norm. They exist due to the superannuation policies that were around in the past. Changing the law and applying the change on a retrospective basis will penalise individuals who adhered to the rules that existed at the time,” Broderick said.
The industry body suggested individuals have already been restricted from accumulating extremely high superannuation balances by the contribution limits implemented on 1 July 2017 and the transfer balance cap introduced in recent years.
“Most individuals with large balances are held by older Australians and considering death benefits must be compulsorily cashed out of the system, it is only a matter of time before large balances will eventually leave the superannuation system,” Broderick observed.
According to Panagis, any policy to impose a cap on retirement savings balances would represent a broken pre-election promise made by Treasurer Jim Chalmers when he said “Labor will not introduce any new superannuation taxes or balance caps if it forms government after the upcoming federal election”.
Further, she argued the tax concessions contained within the superannuation system, another area the government has earmarked for change, are not inequitable.
“All superannuation account holders have access to the same tax concessions, regardless of their account balance. Just because one person receives a higher tax concession relative to another due to having a higher balance does not make it unfair or an inequitable policy. Changing the rules due to a small cohort of individuals will only create further complexity and uncertainty, causing individuals to second guess whether they should put money into their superannuation,” she said.
