Self-managed Independent Superannuation Funds Association national manager Jane McIlroy said 2017 will be remembered as the year the government introduced new rules that significantly rolled back the benefits of superannuation, including limits on the amount of tax-free savings held in superannuation and reductions with the concessional contribution caps.
“A lasting concern about the game-changing 2016 budget was that it set the precedent for future governments of either stripe to change the superannuation policy settings whenever they like,” said Ms McIlroy.
“Superannuation is not sacrosanct. From now on, any budget may contain bad news for super savers generally and especially for members of SMSFs.”
This will impact confidence, she said, as people realise that the rules under which they devote part of their income to superannuation can be changed to their detriment without warning and with retrospective effect.
“The greatest threat to the value of Australians’ retirement savings is not market risk. Invariably, markets recover over time. The greatest threat is regulatory risk,” she said.
“The actions of governments can have immediate and lasting effect. By changing the rules, they can diminish the value of retirement savings already made and they can also limit the potential to save in the future.”
Ms McIlroy predicts that the government may look to make further changes in relation to estate planning in particular, given Treasurer Scott Morrison’s comments that superannuation is not about estate planning.
“That is, if you have some super left when you die, you shouldn’t be able to leave it to your children. Is this a hint that governments might in the future somehow take possession of any super savings that are, in their judgement, surplus to requirements?” she said.
While death duties were removed decades ago, she explained, there’s still a death duty embedded in superannuation, with savings left to non-dependants taxed at 15 per cent plus the Medicare levy.
“Might this rate be changed by a twist of the policy dial in the future?” she said.
”Don’t be surprised if governments come up with new ways to sequester your retirement savings if you have saved more than they think you need in retirement and that you might still have some left over for your family when you pass on.”
At this stage superannuation still remains the most tax effective method of generating wealth (outside of the main residence). Increased complexity and regulation will not deter people if this fact is drummed home.
And then people wont save into superannuation and spend all their money and go on government benefit. I doubt this idea will come to fruition – there is only so far a government can go to attack people who are willing to work and save to fund their own retirement. Incentives taken away is a major deterrant.