Government warned on making rushed changes to super
The government has been cautioned against making any significant changes to super in the short term with the 2017 changes still yet to fully flow through the system.
Speaking to SMSF Adviser, RSM Australia partner, Katie Timms, said while the superannuation sector has enjoyed a period with relatively little regulatory or legislative change for the last few years, this looks set to change this year with the government exploring ideas such as a cap on balances held in super.
In November last year, Minister for Financial Services, Stephen Jones, said the government would be reviewing the tax concessions for higher balance super funds once an objective for superannuation has been set.
Mr Jones said the government will be consulting widely to determine “a common agreed objective for superannuation”.
Once the objective has been settled, Mr Jones said the government will be examining taxation arrangements for super funds and whether measures such as a $5 million on super balances should be introduced.
Following some of the discussion around a potential $5 million limit on balances held in super, Ms Timms said she has already been inundated with questions from clients.
“I’ve already had many, many people contact me about it, who are worried about what kind of action is going to be taken. [It’s] bringing a bit more uncertainty back into the industry,” said Ms Timms.
“We have no idea what this [measure] is going to look like, the number that’s been suggested is $5 million but will it be less than that and is $5 million per person? So, there’s now a lot of questions around what that change is actually going to be.”
While Ms Timms said establishing a purpose for the retirement system would certainly be a positive step, the government needs to allow more time for the 2017 changes to flow through the system before implementing further changes to super.
The 2017 changes saw the introduction of the transfer balance cap, the total superannuation balance, and changes to contribution limits.
“There’s timing issues there. There’s a lot of money that’s going to leave the superannuation system over the next 10–15 years and now we’re looking at another potential overhaul. It’s quite unsettling,” said Ms Timms.
Ms Timms warned that constant changes to the system can impact the ability of clients to be able to plan ahead with their superannuation.
“People are already getting nervous about putting more money [into super] and particularly certain investments. With the economy already unsettled, to then have more potential changes coming into the system just means people don’t want to put money in there because they don’t know if they’re going to get taxed more in the super,” she said.
“They’re asking whether they’d be better leaving it out of the super system. It just doesn’t give people that confidence to be able to make plans for the future.”
Ms Timms said she hopes the government will consult heavily on any potential measures they might be looking at.
“We don’t want to see everything just dropped into the Budget papers on Budget night. It would be great to have consultation on what they’re looking at and what they’re trying to achieve so that the government is making decisions that work with the practicality of industry, which often gets lost,” she said.