ASFA argued in its analysis report The Equity and Sustainability of Government Assistance for Retirement Income in Australia that a concessional contribution would allow people to “accumulate adequate funds for a dignified retirement, while not providing tax concessions on earnings for very large balances”.
The report said lifetime caps would be able to be administered efficiently due to the new reporting requirements of the ATO.
ASFA said while it is important to enable people to ‘catch up’ if they have not been in the system over a long period, in order to provide a comfortable income in retirement, the current laws allow people to contribute a maximum of $540,000 every three years in non-concessional contributions.
“In theory, this would allow some individuals to accumulate very large account balances if they made such a contribution every three years,” said ASFA.
ASFA chief executive Pauline Vamos said the concessional cap would “help ensure that people are using superannuation as a means to provide income for a comfortable retirement, and not for wealth accumulation or estate planning purposes”.
The report also recommended that capping the concessional tax treatment of superannuation, “consistent with what might be reasonably needed for retirement income purposes”, should be continued.
“While tax concessions are a very important feature of our superannuation system, once people have accumulated more than enough money to fund a comfortable lifestyle in retirement, they no longer require government assistance,” said Ms Vamos.
ASFA also believes tax concessions should not extend to account balances in excess of $2.5 million.
“When it comes to the tax concessions applied to superannuation investment earnings, a disproportionate amount flows to higher-income earners,” said ASFA.
“This is an area where government policy could be adjusted in order to ensure the distribution of tax concessions is more equitable.”
