The people have spoken

Anna Carrabs

After months of speculation and weeks of intense politicking, Treasurer Wayne Swan took the highly unusual step of releasing the proposed budget superannuation reforms a month early.

Initially the proposals were supposed to be big revenue earners for the government, designed to help pay for the much-trumpeted Gonski school reforms and the National Disability Insurance Scheme. However, with intense lobbying from former Labor and current government ministers and backbenchers, and associations, such as the Australian SMSF Members Association (ASMA), the superannuation reform package was crafted with a view not to lose too many votes. But the meddling with super and constant speculation hit a raw nerve with our members. But first, our views on the proposed super reforms.

The positives:

  • the increase in the concessional contributions caps to $35,000 effective immediately for those over the age of 60 and from 1 July 2014 for those aged over 50,
  • the reduction for many super fund members of the excess concessional contributions tax. It is now equal to the members’ marginal tax rates, presumably taking into account the 15 per cent contributions tax, and
  • the establishment of an impartial Council of Super Custodians to oversee any future superannuation changes. ASMA hopes it will be truly representative of superannuation members and the wider community.

The negatives:

  • the reduction of the tax exemption on pension assets for members earning more than $100,000 a year, including a one-off capital gain that may have been accruing for decades. ASMA members’ views on this can be seen below and given that it is a partial exemption, the administration costs will be significant and ASMA is concerned about any measure that
  • increases our members’ costs when they are most financially vulnerable – in the pension draw-down phase.
  • the change in the aged pension incomes test for account-based pensions from the current formula, where the purchase price or the amount used to acquire the pension is treated as capital and written off over the member’s life expectancy, to a deemed rate of return on the pension’s value. This will have a significant effect in decades to come and although grandfathered for pensions in place pre-1 January 2015, any transfer of the pension to another fund or change in the terms while in an SMSF will see a new pension commenced and grandfathering lost.

With these super reforms and the election just months away, ASMA surveyed its members to get their thoughts on the measures and also any words of advice for future governments. The questionnaire received more than 500 responses from our broad membership in just two hours. The one question that got them so engaged and motivated was rather simple: Is there any other comment or suggestion that you would give to the government, Treasury and the opposition in relation to your SMSF?

Some of our members’ responses were:

“I spend long hours on managing my SMSF investments to make sure that I will be financially independent until my death. Don’t mess with my super.”

“Provide a legislative framework that allows certainty. Continual change erodes confidence in the system and that will not allow working Australians to achieve their retirement goals. Perhaps the government should address the other end of the spectrum. That is, rein in government handouts and benefits. Don’t continually aim the arrow at the hard-working contributors.”

“Hands off our super money and encourage people to invest in super, not discourage it. There are always other places to invest our money.”

“Unless you are going to come up with ways of promoting people to invest more in super, then stop playing with it. The whole point of super is forced savings, so you don’t have to rely on a pension. Now you’re penalising people for doing what you want.”

“Simpler superannuation legislation changes in 2007 have dramatically increased the savings within superannuation. This has assisted Australia in weathering the global financial crisis. Don’t add complexity and uncertainty to a savings plan that is working effectively for individuals and for government. Look towards further options to boost future savings in the long term, not in the next election.”

So there you have it, a potted excerpt of ASMA members’ voices – if only all of them could be printed. There is no doubt those with SMSFs are very engaged, committed and emotional when it comes to their retirement nest egg and not only in relation to the current but also future governments.

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