Baby boomers and older members of Generation X are the hardest hit by the changes to superannuation from the 2016 Budget.
The March 2017 Class SMSF Benchmark Report finds that the changes legislated late last year most affect older people who haven’t benefited from superannuation contributions for their whole working life. These people particularly depend on higher contributions caps to make catch-up superannuation contributions.
Treasury said that the lower concessional contributions cap would affect “around” 3.5% of Australia’s superannuation account holders. However Class calculates that this change will affect 25.9% of SMSF members over the age of 49 – this is the proportion that made concessional contributions over $25,000 in the 2014/15 financial year.
“Measured by dollar value, 90% of the reduction in contributions imposed by the new cap will come from members aged 49 and over,” said Class.
“Even among those younger than 49 years, 17.3% contribute more than $25,000 a year, much higher than the government’s figure of 3.5%.”
Treasury said that less than 1% of super account holders would be affected by the Transfer Balance Cap. However the proportion of SMSF members is almost ten times higher, according to Class. 9.9% of SMSF members have balances over $1.6 million, with 13.8% of SMSFs having at least one such member.
Class CEO Kevin Bungard said many more Australians would need to carefully consider their retirement plans in light of the changes.
“The average SMSF member is aged 58 and worked for 15 years before the superannuation guarantee was introduced, well over a third of their career,” he said.
“It’s no wonder that more than a quarter of those 49 and older took advantage of the higher caps to make catch up contributions.”
“It will now be much harder for them to catch up for those lost years.”