Townsends Business & Corporate Lawyers special counsel for superannuation, Michael Hallinan, told SMSF Adviser there is a real danger that any negative change to superannuation will “heighten people’s disquiet or disinterest in super” resulting in them “redirecting their money to the last remaining tax haven, which is their family home”.
With the threat of changes, people will be less inclined to think of superannuation as a good long-term investment and so they will invest elsewhere, he said.
“I think it’ll have perverse effects. I think it will see less money going into super, with SG contributions being the only money going in,” said Mr Hallinan.
“If you’re not investing money in super it will either go into consumption or it will go into the family home, which may have long-term negative consequences anyway. It will beat up prices and lead people to build bigger homes.”
Mr Hallinan said it looks certain the government will make at least one or more changes to superannuation because if it had no intention of doing so, the government would be stating it emphatically, so as to avoid speculation.
“I think they’re allowing speculation to run on to assess what is an acceptable level of pain,” he said.
The agitation for these changes is being driven by emotion rather than hard thinking, he added.
“I also think people are vastly overstating the amount of foregone revenue arising from superannuation,” he said.
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A good reason to bring in some means testing of the family home to determine eligibility for the Age Pension. Why we allow people to sit on assets worth hundreds of thousands of dollars, many worth more than a million, to receive a full age pension is just madness.
A move to a no exemptions land tax and the removal of stamp duty will allow people to reallocate their capital without the heavy costs that are imposed currently. People will be happy to move to a cheaper property to reduce their land tax payments. And it will free up their capital to provide for their income in retirement.
Good point smsfcoach: Another way of looking at is if you downsize your home and bank $200,000, and your total asset position is between $375k and $825k then under the AP assets test taper rate your AP would reduce by $15.6k per annum ($3 per fortnight per $1000). The return on the $200k invested would be lucky to be half of that, assuming a 3.9% return could be obtained from a mix of cash and shares you would be worse off by $7.8k per annum. Preverse outcome indeed!
Good article Miranda. I did a blog that looks at the benefit of locking money away in to your home as the 2017 Age Pension changes come in to effect and superannuation changes create need for some certainty.
http://smsfcoach.com.au/2015/1…
It looked at the benefit of a couple with $850,000 of assets using $200,000 to add an extension to their home. They get a higher value home and a 6.78% return on their money through Age Pension entitlements.
Preverse outcome as Michael stated!