SUPERANNUATION

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Superannuation is becoming one of Australia’s major assets, with total balances now well in excess of $2 trillion and expected to rise to over $5 trillion in 10 years.

Given these undeniable facts it’s surprising that the major parties have not spent more time explaining the rationale around their superannuation policies before next week’s election.

Today, in the interests of balance, as well as your long-term financial welfare I’ll examine the various party’s policies to try to work out what is a certainty, and what is only in the “may happen “category.

There is one aspect on which all parties have expressed agreement even if you, dear reader have a different view. That is, that the present tax breaks enjoyed by superannuation are unsustainable and unfair, and heavier taxes need to be imposed on the superannuation system.

The Coalition have now copied Labor’s policy of taxing concessional contributions at 30% on entry when the taxable income of the contributor exceeds $250,000 a year. The Greens would like to go further and also raise entry taxes on those who earn less than that, but there is general agreement that this would be an administrative nightmare and is unlikely to happen.

A Greens spokesperson confirmed they would not support any changes that adversely affected low or middle income earners, nor would they support changing the rate of capital gains tax and superannuation. However, they will wait and see who wins government and then negotiate.

Months ago Labor announced that superannuation funds in pension mode would pay tax at 15% per annum on income of the fund over $75,000 a year per member – the Coalition countered by proposing a cap of $1.6 million to apply to superannuation funds in pension mode as at 30 June 2017. with excess funds to be withdrawn or rolled into in an accumulation fund. Both these are fairly similar, as a balanced portfolio of $1.6 million should produce an income of around $75,000 a year. But in my view the Coalition proposal is a much simpler one to administer.

The parties also agree that employees earning less than $37,000 a year be reimbursed for the 15% contributions tax on employer contributions.

We then enter the realm of the ‘maybes’. In last month’s budget, the Coalition promised that people aged between 65 and 75 would be able to contribute to superannuation without passing the work test from July 2017 and also that all employees would be able to claim a tax deduction for their own additional superannuation contributions even if an employer was making contributions for them.

Both these proposals were very well received, which was certainly not the case with the much publicised Budget proposal to impose a lifetime cap of $500,000 on non-concessional contributions, which was to be applied to include the last 10 years of contributions.

When I asked a Labor spokesperson for their attitude to these last three measures I was surprised to learn that, at the date of writing, they did not appear to have considered them. The best answer I could get was “Labor believes in fairer super and that changes should made in a careful, consultative way, unlike the Government’s hapless and haphazard approach. The changes in the Budget should not have been dropped on an unsuspecting public on the eve of an election, without due consideration or warning.”

That’s a great pity, because for once we have the opportunity to get all parties to agree on what is a fair superannuation system. What Labor should do is adopt a statesmanlike role and back the Coalition proposals. After all, at least half of them were stolen from Labor anyway.

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