‘No plans’ to deal with $5m super cap in budget, says Stephen Jones
While the government says the proposed $5 million superannuation cap is unlikely to appear in the budget next week, it hasn’t ruled out reviewing some of the “distortions” in the super system at a later point.
Following some of the recent proposals by various superannuation bodies, including the Association of Superannuation Funds of Australia (ASFA) calling for a $5 million limit on superannuation accounts, Minister for Financial Services Stephen Jones addressed the issue of high superannuation balances in a recent Sky News interview.
In its pre-budget submission, superannuation body ASFA said the government should look at adjusting the tax settings in superannuation for those on a high income or with a high account balance.
It called on the government to reduce the tax concessions available in super for the 11,000 members with balances over $5 million by introducing a $5 million limit on balances. It also suggested the government reduce the Division 292 threshold to $200,000.
Assistant Treasurer Stephen Jones said the issue of high-balance superannuation funds has been kicking around for a while and that Labor will be looking at the submissions on this proposal, including the one from ASFA.
“The SMSF Association had something to say about this about 12 months ago now as well. So, you know, the issue is being raised by unusual quarters — people who are not normally on that side of the debate,” said Mr Jones.
However, Mr Jones said the upcoming budget on Tuesday next week (25 October) would be focused on implementing Labor’s election commitments.
“We have no plans for this budget to be dealing with that issue. We want to work through all of these issues in an orderly fashion,” Mr Jones stated.
At this stage, Mr Jones said he wouldn’t be ruling anything in or anything out.
“We’re looking at all of the issues in superannuation and across the board and seeing ... where we’ve got distortions in the system or not. I think we need to look at superannuation as a whole,” he stated.
“I’m going to approach it from this point of view: the objective of superannuation is to provide for retirement income. If you’ve got massive retirement balances in a superannuation fund, it’s pretty hard to argue that that’s for retirement income. It might be, you know, cleverly managing your superannuation affairs. But it would be hard to argue that that’s for retirement income.”
Mr Jones said Treasurer Jim Chalmers would focus on implementing an objective for super before making other policy decisions.
“I think that’s the conversation that has to come first before we start looking at some of these other issues,” he said.
In a statement released in March, the SMSF Association said it remained opposed to a cap on superannuation balances.
“We do not and have never supported such a cap,” said SMSF Association chief executive John Maroney earlier this year.
“These balances are a legacy issue with the 2017 changes putting clear limits on contributions to superannuation funds and on amounts that can be held in the tax-free retirement phase.”
While Mr Maroney acknowledged that the association examined the issue of extremely large balances in the Retirement Income Review, it never recommended drawing a specific line.
“It’s our position that any proposal to restrict retention of extremely large balances in superannuation needs to be handled carefully to ensure that any rule changes allow adequate time to manage the restructuring that would be involved, especially where large illiquid assets are involved,” said Mr Maroney.
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.