Superannuation takes one step forward and two steps back
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Superannuation is far too important to this country's future to be nothing more than a tax debate, according to Olivia Long, the CEO of SuperGuardian/Xpress Super.
In our industry, it rarely seems that common sense prevails. Governments make policy decisions that leave most of us shaking out heads, wondering how seemingly intelligent people can come to that conclusion.
But in all my time in the SMSF sector, I had never been prepared for such ill-considered changes as that introduced by Treasurer Scott Morrison on Budget night.
Although there had been some indication that the government would move the goal posts, we had little inkling just how far. In AFL parlance, they were on the wing.
That these abrupt changes enraged the SMSF community is now a matter of public record.
Although there remains debate just how big an impact it had on the July election result, if the anecdotal feedback I received is accurate, then I am certain Liberal and National Party MPs were inundated by aggrieved SMSF trustees about the changes.
In the aftermath of the election, it seemed little would change; perhaps some tinkering at the edges.
So when Morrison and the Minister for Revenue and Financial Services, Kelly O'Dwyer, announced their overhaul of the package I was both pleased and, it's fair to say, somewhat surprised.
In particular, it was the proposed changes to their non-concessional contribution (NCC) lifetime cap policy that caught my eye as being a sensible compromise that will give people a better opportunity to meet their retirement goals.
What the government did was remove the $500,000 cap on non-concessional contributions and replace it with a new measure that reduces the annual non-concessional cap from $180,000 to $100,000 but allows it up to a superannuation balance of $1.6 million.
When coupled with a three-year bring-forward of up to $300,000, it represents a far sounder policy setting that what Morrison spelt out in early May in his Budget speech.
The other bonus is the ending of any ambiguity around retrospectivity with the removal of the lifetime cap's issue of counting contributions back to 1 July 2007.
But is often the case with superannuation, it seems to be one step forward and two steps back.
Although the decision to change the original decision on non-concessional contributions was welcome, I was sorely disappointed the government did not make a move to increase the concessional tax threshold above $25,000 a year.
For those with broken work patterns (especially women) and in small business, they need the opportunity to be able to top up their superannuation when the opportunity avails itself.
For many, it's later in their working lives when the businesses are established or their children have left the nest.
Although I suspect it will be a bridge too far to push concessional caps back to $35,000 a year, the government would be well-advised to at least consider this threshold (and even higher) for those aged 50 and above.
To use that old cliché, that's where the rubber meets the road, when people can see their retirement looming and realise they need to boost their superannuation balances to ensure they can meet their lifestyle expectations after leaving the workforce.
After all, many of these people will be living into their 90s, so they have at least a quarter of a century in which to fund their retirement years.
When compulsory superannuation was introduced in 1992, it seemed the goals were straightforward; people would forgo pay rises to put money away in superannuation (at concessional rates) to fund their retirement.
Over time, it was expected superannuation would ease the burden on the taxpayer via lower pension payments.
It was never envisaged that the pension would be abolished; it would always remain a safety net. But to give people independence, security, and dignity in their retirement years seemed a worthwhile goal.
Today, it seems, the debate has become a zero-sum game around the value (or otherwise) of tax concessions.
To my mind this is why it's so important that the government and the opposition work together to frame a politically and socially acceptable definition of superannuation.
This is what the Campbell Inquiry recommended, and in the wake of the policy debates we have had post the Budget, it cannot happen soon enough.
Superannuation is too important to this country's future to be no more than a tax debate.
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Olivia Long is the CEO of SuperGuardian/Xpress Super, a chartered accounting firm and specialist SMSF administrator. This is a financial news article to be used for non-commercial purposes and is not intended to provide financial advice of any kind.
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