In its submission, SMSFA advocated for the removal of the 10 per cent income test, superannuation contribution age limits, the active member test and the anti-detriment rules from superannuation law.
The submission said the 10 per cent income test or the ‘maximum as an employee’ test prohibits members of superannuation funds from claiming a tax deduction for making a voluntary contribution to their fund if they earn 10 per cent or more of their adjusted income as an employee.
“The alternative for those with 10 per cent of their adjusted income from employment is to use salary sacrifice arrangements with their employer to maximise their concessional contributions,” said SMSFA.
The submission argued employees who cannot access salary sacrifice arrangements through their employer are therefore disadvantaged where they fail the 10 per cent income test.
“We believe that removing the 10 per cent income test would improve the efficiency of the superannuation system and provide greater equity by removing a barrier for Australians who do not have access to salary sacrifice arrangements,” said SMSFA.
The submission also said the current rules regarding the non-concessional contribution bring-forward rule discriminates against workers aged over 65 who are still saving for their retirement and are potentially in a ‘catch-up phase’ in their savings life cycle.
“With more workers continuing to work longer to fund their retirement, it would be sensible to remove the age barriers to using the non-concessional contribution bring-forward rule,” said SMSFA.
SMSFA chief executive Andrea Slattery said it is “imperative to give more opportunity for people to make contributions, especially later in life, to ensure adequate superannuation balances to provide for their retirement”.
“We want to see a recommitment to the long-term goals of superannuation, and in particular a focus on providing retirement income via the three-pillar system of the age pension, compulsory contributions and voluntary contributions.”
The submission also proposed excluding the ‘active member’ test from the requirement for any superannuation fund to qualify for taxation concessions under the income tax law.
“Residency of the fund should be determined on the same principals as all other entities for income tax purposes, that is, the place of establishment and the location of the management and control of the entity.”
SMSFA also argued that the anti-detriment rules were “effectively a legacy item from the changes to superannuation taxation in 1988” and suggested they be removed.
Leo, spot on.
I would prefer to see the work requirement removed altogether for non-concessional contributions.
1 I’m 74 yrs young
2 Disabled by a stroke
3 therefore nobody will employ me
4 therefore unable to put money into my SMSF
5 This disadvantages me/my wife, and the Government by locking me out of saving for longevity
Elaine, I never been able to work out why some people can maximise their annual concessional contributions via the salary sacrifice route, yet others (in particular the self employeed) have had serious hurdles put in their way for decades. So much for ‘taxpayer equity’.
As far as SPAA’s comments go, the other issue is, why when society wants people to work longer, there is all the age based changes at 65. Surely 75 (or even 80) is more sensible these days? Personnally I think there should be NO age limits but that maybe too radical.
I think removal of the 10% income test will be of great benefit to a large proportion of Australian workers. It will enable greater flexibility in saving for retirement by those who need it the most, without having to go to the hassle of salary sacrifice, especially for those whose incomes are inconsistent or whose employers are not willing to participate. It will also benefit those who are mainly self employed but take on short term employment only to find that they suddenly can’t make a deductible contribution.
I would have to question why they are advocating the removal of anti detriment payments. Hopefully not because it is usually difficult for a SMSF to access this benefit, whereas it is easier for retail/ wholesale funds to provide this to members.