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Proposed super carve-outs raise concerns

Super carve-outs raise concerns.

Super carve-outs raise concerns. Photo: Getty

The Turnbull government’s apparent plans to make changes to the controversial $500,000 lifetime cap on non-concessional superannuation contributions are raising ire in the super sector.

A number of super industry heavyweights came out against the plans at the annual Financial Services Council (FSC) in Melbourne last week. One was Perpetual CEO and newly appointed chairman of the FSC Geoff Lloyd, who criticised the newly proposed carve-outs from the cap for life events, like inheritence gifts or divorce settlements.

“It’s already complex,” he said. “Adding more carve-outs will just add complexity, which still continues to provide uncertainty, and while there is uncertainty Australians will start saving outside of super.

“They will say ‘Why would I take the risk of this constantly changing and complex system that I don’t understand when I can go into property?’ and we’ve seen the growth in property prices as a result of that,” Fairfax reported.

Mr Lloyd also criticised the introduction of the caps backdated to July 2007 and the lack of consultation prior to their introduction.

“There hadn’t been any engagement with industry on the $500,000 cap. There is more of a consensus around a lifetime cap, but the $500,000 cap came from nowhere and for us they are quite illogical,” Mr Lloyd said.

KPMG tax director Ross Stephens told the conference there was not case for an inheritance carve-out but said there could be for divorce settlements.

“For the average person the only time they will ever make an after-tax super contribution is when they receive an inheritance, so the $500,000 cap already allows for that.”

He said that there was a case for allowing people who had already maximised the cap but then got divorced and split their super with their former spouse to rebuild savings.

Dixon Advisory financial advice chief Nerida Cole told the conference carve-outs would be of great importance for couples getting divorced.

“Exemptions for divorce settlements could provide some very valuable flexibility. Often couples have to break up the value of two lumpy assets – house and super, well considered exemptions could help where the home is of considerable value and is sold as part of the settlement.”

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