Consumer advocacy body the Australian Independent Retirees (AIR) has called on the federal government to provide an exemption for superannuants over the age of 65 in the proposed Division 296 legislation.
While AIR welcomed the recent amendments to the original proposed tax, such as the government’s decision to drop the taxing of unrealised capital gains, to include indexation of the $3 million threshold and the introduction of the second threshold of $10 million, it said retirees remained exposed to unfair and inequitable outcomes under the legislation.
“The current amendments do not sufficiently protect people who have already structured their retirement under long-standing rules,” AIR chief advocate Wayne Strandquist said.
To this end, the consumer body wants the government to grandfather an exemption for Australians aged 65 and over from the new impost as many of them entered retirement based on pre-existing superannuation and tax settings. Strandquist indicated many now have a limited capacity to adjust financial plans.
“People over 65 complied with the rules in place at the time,” he noted.
“Once you are retired, it is more difficult to unwind or restructure financial arrangements. Applying new tax settings to those already in retirement is effectively retrospective and fundamentally unfair.”
Further, he pointed out couples, in particular, should be allowed to change their retirement structures.
Under the proposed framework, one partner may exceed the $3 million threshold and incur Division 296 tax while the other holds a significantly smaller balance.
“There should be a mechanism that allows couples to rebalance superannuation accounts,” Strandquist said.
“This is an equity issue, as women are more likely to retire with lower super balances due to interrupted work patterns and caring responsibilities.”
AIR also expressed its concerns about the absence of tax refunds when losses on superannuation earnings occur and the administrative complexity the proposed regulations create.
“AIR urges the government to reconsider the legislation to ensure it delivers a genuinely fair and equitable outcome for Australians who are already retired,” he stressed.
