Much greater contributions, and broad reform of the superannuation system, is required to provide a comfortable retirement for most Australians according to a report recently released by Deloitte. The report, Adequacy and the Australian Superannuation System A Deloitte Point of View 2014, argues for a dramatic increase in the Superannuation Guarantee rate, and a combined effort between government and superannuation funds to increase both retirement adequacy and member engagement.
The report forecasts that even by 2034 at least 75% of retirees will still receive all or part of the age pension under current eligibility. Also, according to ABS statistics, the next 10 years will see an additional 1.7 million Australian retirees and pre-retirees.
Deloitte says that, even with the move to a superannuation guarantee rate of 12% this will not be enough to provide for a comfortable retirement from superannuation. The calculations show that men would have to contribute 5.5% each working year, with women requiring an additional 7.5%, on top of the 12% superannuation guarantee currently scheduled . This would take the super guarantee rate to between 17.5% and 19.5%. Given the opposition to raising the rate to 15%, as some have suggested, this seems unlikely.
Also, this lower rate of superannuation contributions is made worse by successive governments reducing the concessional contribution caps, which according to Deloitte has “meant it is even more difficult for those close to retirement to claw back reductions to their super balances” from the GFC.
The ATO has released an update to the ATO app to include new superannuation and SMSF features, in addition to the individual taxpayer and business features.
“With information and assistance tailored to trustees, we’re making it easier for you to understand your responsibilities and manage your fund. Use checklists to plan your activities throughout the year and never forget important tasks. Get the latest news and updates straight from the source, check out new SMSF education videos and find out what other trustees are asking about in the FAQs”.
ATO app Superannuation Features
- Your Super
- Super guarantee eligibility calculator
- Super guarantee contributions calculator
- Thinking about an SMSF
- SMSF checklist
- SMSF resources
- News & updates
The Association of Superannuation Funds of Australia (ASFA) has recommended that non-concessional contributions be subject to a lifetime cap, and super tax-concessions should be removed for super balances above $2.5 million.
The research paper, The equity and sustainability of government assistance for retirement income in Australia, makes several recommendations:
- The level of concessional contributions should continue to be capped
- A lifetime cap for non-concessional contributions should be introduced
- Tax concessions should not apply to very high superannuation balances
ASFA Superannuation Recommendations
The level of concessional contributions should continue to be capped
ASFA argues that the cap on concessional contributions is reducing the tax concessions available to high-income earners and should be continued:
“The current concessional caps are working, so the thresholds should not be lowered, but indexing them is important”.
A lifetime cap for non-concessional contributions should be introduced
The paper also argues that high-income earners can use the non-concessional contributions cap to accumulate large, concessionally-taxed, superannuation balances. ASFA says a better policy would be a lifetime cap on non-concessional contributions, as this would “ensure that superannuation is used to provide income in retirement and is not used for wealth accumulation or estate planning purposes”.
Tax concessions should not apply to very high superannuation balances
ASFA also wants the “disproportionate” amount of superannuation tax-concessions going to high-income earners reduced, and recommends removing “the concessional tax treatment for very high superannuation balances, for example those in excess of $2.5 million”. Though this level can be “adjusted in order to ensure the distribution of tax concessions is more equitable”.
Roy Morgan Research has found that members are much happier with the performance of SMSFs than industry and retail funds. 75.6% of members are satisfied with the investment performance of their SMSF, as compared to 55.8% for industry funds and 53.7% for retail funds. Across all funds 55.1% of members were satisfied with the investment performance of their super fund in May 2014, compared to 47.9% one year earlier. The research report, Superannuation Satisfaction Report – prepared by Roy Morgan Research, is compiled from more than 30,000 interviews per year.
Norman Morris, Industry Communications Director for Roy Morgan Research, says:
“With the expansion of the SMSF sector, satisfaction with financial performance is increasingly a factor that fund managers should be taking notice of. It appears that satisfaction with superannuation has a lot to do with the amount in super and the consequential level of engagement”.
Super Fund Investment Performance Satisfaction
|Fund Type||May 2013||May 2014||Change|
Source: Roy Morgan Research
The ATO has posted a video of the recent webinars for superannuation professionals covering the new powers the ATO has been given to punish non-compliance with the SIS Act.
The ATO has also published answers to some of the questions raised by participants in the webinars:
- Ignorance of the rules by a trustee will not prevent the ATO from imposing a penalty
- Admin penalties will only be applied once per contravention “even if the contravention spanned more than one year”
- Generally where there are multiple contraventions from a single action, the Q&A uses the example of a in-house asset over 5% loan to members, there will only be one admin penalty
- Where a penalty provision has been contravened the ATO will impose a penalty “in all cases”, but it may be remitted – partially or fully
- For individual trustees the fine will be imposed on each trustee separately
- For corporate trustees it is up to the directors to decide how they split the fine, though they are “jointly and severally liable to pay the penalty”
- The ATO may decide to remit, in part or in full, a penalty for some trustees but not others, depending on the situation
- Generally admin penalties will be imposed on trustees of the fund at the time of the contravention, not new trustees
- The ATO has a number of options to recover unpaid penalties, including
- Payment arrangements
- Withholding from tax refunds
- Legal proceedings
The ATO has approved a second course as meeting the requirements of an Education Direction. This new power granted to the ATO allows notices to be issued to trustees requiring them to undertake a course of education about the obligations of an SMSF trustee and provide evidence of completion to the ATO. This power is one of several new options the ATO has to encourage compliance with the SIS act and regulations.
The course approved is one that was already freely available online to SMSF trustees to learn about their obligations – smsftrustee.com, which is a joint venture between the accounting bodies CPA and ICAA.
According to the smsftrustee website:
“At the completion of this program, trustees will be able to understand:
their roles and responsibilities within a SMSF
the investment restrictions imposed on trustees of a SMSF
the rules and limitations surrounding contributions and benefit payments within a SMSF
the administration involved with a SMSF
At the conclusion of the training program, on successful completion of a small quiz, a certificate of attainment will be provided”
The first course approved was the ATOs webinar Self-managed super funds for trustees – an overview.