The Federal Government has passed its changes to superannuation, claiming they will save nearly $3 billion and future-proof the retirement system for decades to come.

The government will impose a $1.6 million cap on the amount of tax-free super savings a person can hold in retirement from July next year.

Under the changes, non-concessional super contributions will be limited to $100,000 a year, down from the current $180,000.

The changes represent the most significant change to the system in more than a decade.

The legislation also allows for catch-up contributions, such as in the case of women returning to work after having a baby.

But Labor opposed the catch-up option, arguing it would be used predominantly by men on high incomes, rather than women trying to catch up after taking breaks from the workforce.

“I don’t think many women in part-time work returning from maternity leave or a period out of the workforce have a lazy $25,000 or more that they seek to put into their retirement,” Labor’s Jenny McAllister said.

Treasurer defends changes

Treasurer Scott Morrison said that while the reforms were tough to manage, they were fair and necessary.

“This represents the most significant change to protect the flexibility and ensure the sustainability of superannuation in more than a decade,” he said.

“It will enable the system to be future-proofed. They were not easily won, but it was worth it.” 

Federal Treasurer Scott Morrison says the reforms will have long-term benefits. Photo: AAP

When the changes were first introduced in the last federal budget, the government planned to impose a $500,000 lifetime cap on after-tax super contributions made since 2007, but was embarrassed by a backbench revolt from its own side.

Liberal Party donors were also angry at the mooted changes, causing grief in the lead-up to this year’s election.

The compromise is a modified version of what the government took to the election in July.

“We had to make the case and make the argument and we had to take it through the parliament with our colleagues and work through all of those issues, but that’s the work of government,” Mr Morrison said.

‘Pandering’

Shadow treasurer Chris Bowen said the government was assuaging the extreme right wing of the Coalition party room. 

Shadow treasurer Chris Bowen criticised the government’s failure to adopt Labor’s amendments. Photo: AAP

“The government quickly rejected Labor’s amendments to their super tax package that would have seen a further $1.4 billion in budget improvements over the forward estimates and $18.9 billion over the decade – on top of the government’s plan,” Mr Bowen said.

“The Treasurer chose to create new super tax concessions that largely benefit high-income earners at the urging of the extreme right wing of the Coalition party room, over enacting further measures to deliver more budget savings.”

The legislation that passed has been welcomed by some super groups but criticised by the Combined Pensioners and Superannuants Association.

Revenue and Financial Services Minister Kelly O’Dwyer, however, said the changes would level the playing field for more than 800,000 Australians.

Mr Morrison ruled out further super tax changes for the next election.

Change has come

The Australia Institute’s chief economist, Richard Denniss, said while both major parties went to the 2013 election with barely a mention of the winding back of super tax concessions, the Coalition and Labor made pitches to voters at the 2016 election on how to best tackle the issue.

“We have had a robust debate about how to fix the problem in a very short time,” Dr Denniss said.

“And while the amount of monies being trimmed by these changes isn’t large, it shows we have done a 180-degree turnabout in one election cycle.

“We have gone from ‘no problem’ to ‘how do we fix the problem?’.”

-with agencies. Additional reporting by Chris Johnson