Addressing SMSF Adviser’s SMSF Summit 2019 in Sydney last week, the SMSF service provider’s general manager, Peter Burgess, said the government may soon look at increasing the age at which retirees could access their super in line with recent rule changes around contributions and redundancy payments.
“There’s no word yet on whether they will increase the preservation age because at the moment once you turn 65 it’s an automatic condition of release, but they’ve also increased the contribution age to 67 and everything seems to be in line with the age pension age of 67,” Mr Burgess said.
“We saw a bill which has now received royal assent in relation to redundancy payments where you can have a tax-free component up to the age of 67, where under the old rules you could only have a tax-free component up to 65.”
Mr Burgess added that given superannuants could soon make contributions up to the age of 67 without meeting the work test under rules slated to take effect from 1 July 2020, if the government did not increase the preservation age in line with this, it could create an attractive tax reduction tool for those aged 65 to 67.
“If they don’t increase the preservation age we will have a situation where clients aged 65 and 66 can make contributions whenever they want and take that money out whenever they want and get the tax concessions along the way, so I’m not sure that’s what they intend,” he said.
Further, Mr Burgess added that it would not be surprising to see the government propose to remove the work test for contributions, after scrapping its previous attempt in order to get the bulk of its 2016-17 super reforms through parliament.
“Clearly the government has a dislike for the work test because they have been chipping away at it for a number of years,” he said.
“In 2016 they wanted to do away with it altogether and were forced to put it back in, and last year in the budget they announced the 12-month exemption for recently retired clients. So I wouldn’t be surprised if at some point in the future they have another crack at getting rid of the work test altogether.”
However, Mr Burgess said the proposal to increase SMSF members to six, which had been a topic of discussion in the industry for some time, was not likely to be introduced to parliament in the near future.
“I think the government’s got other priorities in relation to super right now so I’d be very surprised to see this initiative being legislated any time soon,” he said.
I think that rather than a piecemeal approach, the Government should review all the different variations to age based rules. To name a few which come to mind:
– Small Business CGT concessions and the link to age 55
– Receiving ETPs and preservation age measured at the end of the FY and not at the time or receipt
– Downsizer contributions and link to age 65
– Government co-contribution and the requirement to be less than 71 at the end of the FY
– Spouse contribution and the requirement to be less than 70 at the time of the contribution
I could go along with increasing the preservation age to 67 if it applied to everyone, including politicians, judges, public servants, whomever. Obviously won’t happen so the proposal should be dropped.
Let’s hope that any attempt by a government to force people to work until they die or are medically unfit to enjoy retirement sends them to the opposition benches in the same way the Labor Party were kept on the opposition benches when trying to remove franking credit refunds amongst other attacks on those getting to retirement. Why not instead stop concessional contributions from preservation age or some other simple action that doesn’t hurt everyone by putting everyone under the same umbrella. It annoys me how no one in government realises that a 60 year old, even with todays high medical standards, could be young and fit, or could be a medical mess. And how does one get an income from the age of 55 to the assumed target preservation age of 67? This is the unemployable age range. Do people in this age range, who have worked hard all their lives, now have to be demeaned by applying for Newstart until they can get their super as a pension? I’m glad I’m 64 and none of this applies to me. But if I was still working and the government forced a preservation age of 67, I’d just stop contributing altogether and invest elsewhere – which I suspect, might be the master plan – to stop having to give tax concessions on super contributions.