1,260,000 people to be worse off under Budget super changes

Federal Budget 2016/17, changes to superannuation, 4% worse off, transition to retirement pensionsUp to 1,260,000 people will be worse off under changes to superannuation in the 2016 Budget, according to the Association of Superannuation Funds of Australia (ASFA).

“In this context to inform the debate, ASFA has prepared a consolidated set of figures that outlines the revenue impacts and estimated number of people affected by each of the measures,” said ASFA.

ASFA estimates that 110,000 people will be affected by the $1.6 million Transfer Balance Cap, 80,000 by the lifetime $500,000 non-concessional contribution cap, 20,000 affected annually by the abolition of anti-detriment payments and up to 500,000 by the lower concessional contributions cap and/or lower Division 293 threshold. More than 550,000 people are estimated to be affected by removing the ECPI tax concession on Transition to Retirement pensions.

This totals to 1,260,000 people.

ASFA also estimates that 4,325,000 people will be better off under the Budget superannuation changes, including 3,200,000 from the Low Income Superannuation Tax Offset, which replaces the LISC.

While ASFA says more than 550,000 people will be affected by the TTR changes, senior members of the Government have said that only 115,000 people will be affected by that change. The Government points to research by the Productivity Commission in arriving at this figure. The Commission said:

At present, it is difficult to ascertain precisely the purpose for which individuals are using the transition to retirement provision — and, in particular, the extent to which it is encouraging people to retain some connection with the workforce, as distinct from simply operating as a device to minimise tax. That said, of the estimated 5 per cent of eligible Australians (workers between the ages of 55 to 65) who received transition to retirement pensions in 2011-12, the majority were working full-time and were relatively wealthy.

In his speech the Treasurer said the changes would mean only 4% of Australians with superannuation were worse off. According to ATO figures over 14 million Australians have a super fund account. On the Treasurer’s own figure this would equate to over 560,000 people adversely affected.

The Budget speech didn’t draw a connection between the 4% worse off under the Budget super changes and high income earners. But the Prime Minister has, saying shortly after the Budget was released: “Our reforms to superannuation, which affect only the 4 per cent of highest income earners, in any negative way or adverse way, these reforms make our superannuation system fairer and more flexible.”

Meanwhile 70% of CPAs have estimated that 6% of their clients will be affected by the Budget superannuation changes.

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