The May budget proposed several changes to the super system – one is that all workers will come under a $25,000 cap on concessional contributions (mainly those are the employer contributions for workers).
A report at SMSF Advisor states –
“Challenger’s Jeremy Cooper has defended the proposed $25,000 cap on concessional contributions – a budget measure that has been met with significant opposition in the SMSF sector.
Treasurer Scott Morrison announced plans to lower the concessional contribution caps for superannuation to $25,000 in this year’s federal budget. Key industry bodies, including the SMSF Association, have criticised the measure, saying it will have an “enormous impact” on those who are aiming to be self-sufficient in retirement.
Speaking at the Tax Institute’s Superannuation Conference, Mr Cooper said while some might regard the measure as “draconian”, it will not be a significant roadblock to accumulating retirement savings.
“It is only a tax measure, not a savings cap as some commentators assert,” Mr he said.
“It will not prevent most people saving for retirement, either in or out of the super system. It will merely dictate how much of a leg-up certain savers will get from the tax system.”… MORE HERE
At the Financial Observer, findings by the founder of SuperRatings, Jeff Bresnahan reported –
“the $25,000 annual concessional contribution limit was “the least thought out” of the super changes in Bresnahan’s opinion, as it limited pre-retirees’ ability to contribute to their super when they most needed to. “The last 15 years of work are for many the only time they are able to fast-track contributions to build up their nest egg and should be encouraged, not restricted,” he said. “This is particularly relevant for those currently aged over 50, most of whom haven’t enjoyed the benefit of full superannuation throughout their working lives and are only now reaching a time in their lives when they can afford to make additional contributions.” MORE HERE
While research by The Grattan Institute, reported at The Conversation, finds –
“Parts of the budget package may make the system even more generous to high-income earners – and more expensive for the government.
Under the plan, people will be able contribute more to their super when they have not reached their pre-tax contributions cap in previous years. Taxpayers with a super balance of less than A$500,000 will be able to draw on unused caps from the previous four years to make “catch-up” contributions.
These caps are currently $35,000 a year in pre-tax contributions for a taxpayer over 50, $30,000 for one under 50. The budget will create one cap of $25,000 a year. Being able to make these payments is excellent for one’s tax bill, as they attract only 15% tax for those with incomes of under $250,000, and 30% for higher earners – rates far lower than most people’s marginal tax rate.
The budget papers trumpet the ability to bring forward unused caps as helping women and carers and anyone with a broken work history. But as Grattan’s submission to the recent Senate Inquiry into Economic Security for Women in Retirement demonstrates, all the evidence shows that few middle-income earners – and even fewer women – make large catch-up contributions to their super fund. Women aged below 50 make up only 12% of people that age with balances less than $500,000 who contribute more than $25,000 a year to super. Most women simply can’t afford to make large catch-up contributions. A mere 2% of women with superannuation balances of less than $500,000 – 130,000 people – made pre-tax contributions of $25,000 or more in 2013-14. And 80% of them are among the top 20% of income earners.” MORE HERE
What are your thoughts?
How will the proposals affect your retirement plan?
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