Ban non-concessional contributions, says lobbyist
One lobby group has called on the government to ban non-concessional contributions for super balances exceeding $2.5 million.
In a submission to government on the Tax Discussion Paper, Taxpayers Australia proposed the government limit non-concessional contributions by either imposing a lifetime cap of six times the current annual rate or banning non-concessional contributions after a set superannuation balance is achieved.
Speaking to SMSF Adviser, Taxpayers Australia superannuation and services manager Reece Agland said the rationale behind the recommendation is the argument that the purpose of super is for retirement only.
Taxpayers Australia chose the $2.5 million figure since it has been referenced by the Association of Superannuation Funds of Australia (ASFA) in the past as being the point at which retirees are generally earning enough income for a comfortable lifestyle, Mr Agland said.
“Any more than that and you may not need the concessions, so once you’ve reached your $2.5 million you can’t make any additional non-concessional contributions,” he said.
“With concessional contributions capped at $35,000, you’re not going to be able to make huge additions to your super but if you’re contributing $540,000 every three years, then that’s really going to boost your super balance.”
The ban would not, however, apply to small business capital gains tax concessions, the submission said.
Mr Agland said a survey of Taxpayers Australia’s members indicated there is support for changes to the superannuation system to address perceived equity issues.
“There is wide support for the superannuation system and the need for there to be tax concessions to encourage people to make additional contributions,” said the submission.
“However, the ability of a small subset of taxpayers to earn considerable income tax-free while accessing government services and benefits at the same time as others contribute to the tax system is seen as inequitable and needing to be addressed.”
The submission also proposed that limits be placed on the ability to take a lump sum on retirement.
It recommended that individuals with a super balance below a given threshold should be allowed to take out the full amount as a lump sum, while permitting those with balances above the threshold only to take a percentage of their total balance.
“There is some concern that people are taking a large part of their super out and spending it on a holiday overseas and doing all these wonderful things which is nice to do but it’s not for the purpose of superannuation,” said Mr Agland.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.