The Labor Party announced their proposed superannuation policy on the 24th of August in advance of Parliament resuming at the end of the month. Unsurprisingly they have agreed with the Government that there is a need for superannuation reform but have a different take on how it should be done. They have indicated they will not support the proposed changes without the following amendments:
- the $500,000 lifetime non-concessional contribution (NCC) cap to apply prospectively from Budget Night, 3 May 2016 and not count NCC contributed since 1 July 2007;
- People earning over $200,000 in personal income will pay 30% tax on concessional contributions rather than 15%. This income threshold is reduced from the $250,000 proposed by the Government.
Disappointingly, Labor have also stated they will oppose the proposed changes of:
- Allowing the carry forward of unused concessional contribution caps;
- Removing the “work test” requirement for people aged 65-74; and
- Increasing the access to concessional contributions through the removal of the “10% rule” allowing employees to make personal concessional contributions.
The opposed changes were the three positive announcements contained in the Federal Budget which if introduced will increase flexibility for all Australians regarding their ability to make concessional contributions and save for their retirement. From a funding perspective, Labor have identified that these will need to be cut to help cover the reduced savings if the NCC lifetime cap is made prospective.
The underlying message from Labor is that they believe the superannuation system should be fair and sustainable for all Australians and more effectively target tax concessions at low and middle income earners. They also emphasise their opposition to any retrospective changes.
Unfortunately, there continues to be silence regarding the reducing of the concessional contribution cap to $25,000 and it appears that the NCC lifetime cap amount of $500,000 will also be accepted. Together these limits place heavy restrictions on people’s ability to save in superannuation especially as they near retirement when they may be in more of a position to contribute.
It may yet prove that Labor’s proposals are their first move in the political dealing that will be ongoing upon the resumption of Parliament next week and may well be traded off for other concessions at a later stage. Clarity regarding the future of the superannuation landscape still appears a long way off.
Hanrick Curran will continue to remain abreast of changes to the Superannuation legislative environment and provide updates as new information comes to light. For further information on the Superannuation environment please speak with your usual Hanrick Curran adviser or contact Superannuation partner, Clive Todd on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.