The Turnbull government’s superannuation reform legislation has finally passed the Senate after six months of political battling that threatened to split the Coalition parties and saw Labor side with those who opposed elements of its progressive intent.

Now that the new system has become law, it is time to look at who its winners and losers are.

What the government says

Treasurer Scott Morrison says the reform package will deliver the budget savings of $3 billion over the next four years. That’s not much in a $84.6 billion budget deficit but it will help rein in spending when it is introduced from 1 July, 2017.

Is it fairer?

The new system will wind back the benefits to wealthy people by restricting to $1.6 million the maximum super balance allowable to earn tax-free income in retirement.

Super is still not equitable. Photo: Getty

It will also cut concessional contributions to $25,000 a year, down from the current maximum of $35,000, or $30,000 for those under 50. Non-concessional contributions will be reduced to a maximum of $100,000 a year from $180,000 and will be banned for those with funds of $1.6 million or more.

Alex Joiner, chief economist with IFM Investors, said the reforms “have not made the system significantly fairer. They have made the situation of those with a lot of money a little more equal to that of everyone else.”

Average earners

If you are on a low to average income without any excess savings or investments the new system will probably not change your life very much as most of the changes affect higher or lower income earners. But there are a couple of possible ways the new system could benefit you.

• Spouse contribution tax offset: The new system allows a tax offset for contributions to the fund of a low income spouse. The income limit will be raised from $13,800 to $40,000 with the maximum rebate of $540 a year tapering down when the spouse income reaches $37,000.
• LISTO: The low income tax offset gives workers earning $37,000 or less a year offset payments of up to $500 a year to ensure the tax on their super (15 per cent) doesn’t exceed their income tax rate. Around 3.1 million low income earners will benefit from the decision to retain this Labor measure that the Abbott government planned to scrap.

Personal deductible contributions

Until now, if less than 90 per cent of your income came from self employment, you have not been able to make tax concessional personal deductions to super. From 1 July, 2017 you will be able to and 800,000 people are expected to avail themselves of it, Treasurer Morrison says.

This will also mean that those who’s employers don’t offer salary sacrifice options will be able to make the payments for themselves.

Under this, from 1 July, 2018, people will be able to gross up all their unused concessional caps for up to five years and make one-off contributions as long as their overall balance is under $500,000.

The government says this will aide those with interrupted career trajectories, particularly women raising children, and should aid 230,000 people in 2019-20.

However research by the Australian Institute of Superannuation Trustees estimated the average after-tax contribution for those aged 50+ is less than $4000 a year so most people won’t benefit from these measures.

Biggest losers

Self-managed super fund property strategies could be the biggest losers in the new system. People who bought highly-leveraged properties in their funds and relied on non-concessional contributions to pay the mortgage will be caught out if their find size exceeds $1.6 million.

You could get a benefit for your second occupation. Photo: Getty

Those contributions will no longer be legal once their fund hits the limit so they won’t be able to make payments. The real estate industry is already reporting that SMSFs are putting properties on the market.

Transition to retirement pensions will also be taxed at 15 per cent while till now they were tax free.

The threshold for a hike in the contributions tax from 15 per cent to 30 per cent has also been lowered from $300,000 a year to $250,000.

Labor would like to see that come down to $200,000 a year and concessional caps reduced to $75,000 a year. Labor also opposed a now-scrapped plan to backdate a non-concessional contribution cap to $500,000 to 2007.