The Association of Superannuation Funds of Australia (ASFA) has rejected the suggestion that its proposed $2.5 million cap for super benefits, which attracts tax concessions, is overly generous.
ASFA previously proposed that a $2.5 million ‘ceiling’ on the amount of superannuation that can be withdrawn in retirement would “put an upper limit on the adequacy of the system”.
But Grattan Institute chief executive John Daley said such a high cap “doesn’t pass the giggle test”.
Instead, Mr Daley advocates a reduction of the concessional contribution cap to $10,000 – a measure that he says would stop high-income earners using the system as a generational wealth transfer system.
But ASFA chief policy officer Glen McCrea expressed doubts that the Grattan Institute is fully taking into account “the difficulties faced by those older Australians as they retire”.
“I think the Grattan Institute is thinking from a budget lens,” he said.
“We’re doing a lot of work internally in thinking about the tax debate. We’re very strong on our $2.5 million cap.”
ASFA has estimated that the minimum retirement income required for a couple to have a ‘comfortable’ standard of living is $58,784, assuming home ownership – and the balance necessary to achieve that is $640,000.
“The idea of setting a benchmark is we think that’s almost a minimum for the system to deliver. [It's] important to think of all policies and whether we can get to that minimum level,” Mr McCrea said.
“The government has undertaken some reforms in the age pension space. And that means that the lump sum amount of money you need to produce that $58,000 has increased.”
But while ASFA says $640,000 is enough for a ‘comfortable’ retirement, Mr McCrea maintained that the ‘ceiling’ of $2.5 million is reasonable.
“We say: when you hit retirement you can’t have more than $2.5 million in your superannuation,” he said.
“We’re cutting a limit – beyond that you’re not going to get that same level of tax concession on the balance.”
ASFA believes that it is “great” there is public debate on tax concessions in super, and the lobby group is anticipating the government’s tax ‘green paper’ due in the middle of 2016.
“The debate’s starting to warm up. I suspect over Christmas and the New Year it will keep going. We’re considering these issues and looking forward to the green paper process,” Mr McCrea said.
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