The 2016-17 federal budget will see a $1.6 million cap placed on the amount of money that can be transferred to the retirement phase tax environment.
There will also be a reduction in the income threshold for the additional 15 per cent concessional contribution tax to $250,000 (down from $300,000).
The annual concessional contribution cap will be lowered to $25,000, down from $30,000 for those aged below 50 and down from $35,000 for those over 50. A lifetime limit of $500,000 for non-concessional (after tax) contributions to super will also be imposed.
The Financial Services Council (FSC) said the “proposed restrictions on savers and retirees appear to be counterproductive”.
“The test for this budget is whether Australia will have more pensioners or more self funded retirees,” FSC chief executive Sally Loane said.
“The new caps and thresholds limit the capacity for Australians to save for their own retirement and will restrict retirees to an income of around $80,000 per annum from their superannuation.
“An $80,000 limit will fail to cover the costs of retirement for many Australians, when you include healthcare, aged care and a comfortable standard of living,” she said.
Deloitte superannuation leader Russell Mason said the reduction in the concessional contribution cap to $25,000 a year is a “retrograde step”.
“Reducing the concessional cap and having a rolling five year catch up is not sufficiently flexible, especially for women and older workers. Deloitte has always stated that having a lifetime cap is a better approach,” Mr Mason said.
But overall, Deloitte said the superannuation tax concessions are “reasonable” – even if they could have been “more flexible”.
For example, the government could have lowered the threshold for the additional 15 per cent tax for concessional contributions much further than $250,000, said Deloitte.
“The government could have gone further in helping to address the inequity and we would not have been surprised if it had been reduced to $180,000,” said Deloitte private superannuation tax partner and SMSF leader John Randall.
Along with changes to superannuation, the 2016-17 federal budget contains measures that will target multinational tax avoidance, expanded tax concessions for small business and measures to address ‘bracket creep’ for middle income earners.
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