Various industry bodies have called on the Government to increase the superannuation contribution caps in the upcoming Federal Budget, though there is little consensus on how much to increase the caps.
Both concessional and non-concessional contribution caps have been lowered over the last decade. Most recently the Coalition’s 2016/17 Budget lowered the concessional contributions cap to $25,000 irrespective of age, and the non-concessional contributions cap to $100,000.
There is hope from industry bodies that the 2019/20 Budget may start to reverse this trend.
The SMSF Association calls, in its pre-Budget submission, for people over age 50 to have a have a concessional contributions cap of $35,000. This is similar to the system that operated until 2017/18, where older people had access to a higher concessional contributions cap.
The Association says the current contribution caps are “inadequate, particularly for Australians approaching retirement age”.
“Restrictive caps do not incentivise individuals to save for their retirement during the years in which making larger contributions to superannuation is financially possible.”
CPA Australia has a similar approach. The accounting body recommends the Government consider the merits of lifting the concessional contribution cap from the currentl level of $25,000 to $30,000, with no age restriction.
Meanwhile Chartered Accountants Australia & New Zealand (CAANZ) has broader reform in mind.
CAANZ recommends that the annual caps be replaced with a lifetime super contribution cap, with “appropriate transitional arrangements”.
The accounting body says the current annual assessment process is “complicated, costly to administer and does not work”.
CAANZ says the contribution caps are based on the false assumption that super fund members will make contributions at a constant rate. This has a negative impact for people broken work patters, such as women, while causing “severe tax penalties” for others.
“The reality is that most peoples ability to make significant super contributions only occurs later in their working lives.”