Australians will be determining the future direction of the nation’s $2 trillion superannuation sector on Saturday as they cast their ballots in the federal election.
Regardless of the outcome, however, it appears further major changes to the retirement savings system are inevitable.
The incumbent Coalition government has already outlined its planned overhaul of the system, announcing a series of key changes to superannuation contribution amounts and limits in the May 3 federal budget.
The Labor opposition has effectively backed the same proposed changes by building the full $6 billion in projected savings from the government’s measures into its own policy costings.
But the opposition has also pledged to consult with the superannuation industry over the impacts of the Coalition’s proposals, particularly the imposition of a retrospective lifetime cap on non-concessional (tax paid) contributions.
The Coalition’s super policies
Federal Treasurer Scott Morrison and Assistant Treasurer Kelly O’Dwyer claim the government’s package of superannuation tax reforms are designed “to improve the sustainability, flexibility and integrity of the superannuation system”.
• Lowering of concessional contributions cap to $25,000 per year for everyone;
• Catch-up contributions allowed for super accounts of less than $500,000;
• Lifetime $500,000 non-concessional contributions cap backdated to 2007;
• A $1.6 million cap on tax-free pension accounts. Earnings on any excess funds will be taxed at 15 per cent in retirement;
• Transition to retirement withdrawals to be taxed at 15 per cent;
• Individuals earning $180,000 or more per year to pay 30 per cent tax on contributions;
• New Low Income Superannuation Tax Offset for those earning less than $37,000;
• Easing of restrictions for self-employed to make super contributions; and
• Lifting of superannuation age contribution limit from 65 to 75.
Labor’s super policies
Labor leader Bill Shorten is holding true to his party’s Fairer Super Plan announced in 2015 but has largely backed the Coalition’s measures aside from the $500,000 lifetime non-concessional cap.
Labor’s plan is to put the retirement income system on a sustainable footing by targeting superannuation tax concessions to those that need them the most.
• Cap tax-free earnings in pension phase on account balances above $1.5 million to $75,000 per year;
• This amount is not indexed. Earnings in excess of $75,000 taxed at 15 per cent; and
• Individuals earning $250,000 or more per year to pay 30 per cent tax on contributions.
The Greens’ super policies
The Greens have just updated their superannuation policy following a report in The New Daily showing factual inaccuracies and outdated assumptions in its election campaign material.
The core plank of its Progressive Superannuation policy is ending “unfair tax breaks and boosting super for low-income earners”.
• Remove the flat 15 per cent tax rate on concessional contributions;
• Replace the 15 per cent tax rate with a progressive tax scale based on income, ranging from zero to 32 per cent;
• The Greens proposal for superannuation is that no tax will be payable on contributions for those earning less than $19,400 per year;
• The tax rate will rise to 4 per cent for incomes between $19,401 and $37,000, and to 15 per cent for incomes between $37,001 and $100,000; and
• Incomes between $100,001 and $150,000 will pay 22 per cent, and from $150,000 onwards 30 per cent.
What others propose
• Speed up the increase in the superannuation guarantee from 9.5 per cent to 12 per cent;
• Increase transparency, end fee gouging and make funds more accountable for their investment choices;
• Require super funds to hold an annual general meeting of members; and
• Recalibrate tax breaks for superannuation.
• Impose a flat 2 per cent tax on all superannuation contributions and withdrawals.