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.
Introduced by the previous Labor Government the LISC offsets contributions tax for low income earners, up to a limit of $500. If the bill is passed in its present form the LISC will only operate for the 2012/13 financial year.
The LISC repeal is contained, among other measures, in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013 [No. 2], which passed the House of Reps last week and will likely be making its way to the Senate next week. The first attempt to repeal the LISC was in the Minerals Resource Rent Tax Repeal and Other Measures Bill 2013, which was blocked by the Senate in March.
Speaking to the Parliament about the bill Steven Ciobo, Parliamentary Secretary to the Treasurer, said:
“Schedule 7 of the bill abolishes the Low Income Superannuation Contribution (LISC). The bill ensures that the LISC is not payable in respect of concessional contributions made on or after 1 July 2013.
The government will revisit concessional contribution caps and incentives for lower income earners once the budget is back in a strong surplus.
Low- to middle-income earners may be eligible for the superannuation co-contribution to boost their retirement savings.
The removal of the low income superannuation contribution will improve the budget position by $2.7 billion in cash terms by 30 June 2017“
An update of superannuation changes at the end of the 2013/14 financial year, including the current state of superannuation changes passed, working their way through parliament, or un-legislated.
Superannuation Changes 2014 – June
Temporary Budget Repair Levy
The following superannuation-related bills to implement the Budget Repair Levy have passed both houses:
- Superannuation (Excess Non-concessional Contributions Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
- Superannuation (Excess Untaxed Roll-over Amounts Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
- Superannuation (Departing Australia Superannuation Payments Tax) Amendment (Temporary Budget Repair Levy) Bill 2014
Protection for anticipation of certain discontinued announcements
Following a Treasury consultation the Tax and Superannuation Laws Amendment (2014 Measures No. 2) Bill 2014 has passed both houses of Parliament, pending Asset. The bill gives effect to protections for announced but un-enacted tax and superannuation changes.
Update: note the potential changes announced in the 2016 Budget.
The superannuation Non-Concessional Contributions cap for 2016/17 is $180,000:
- 2016/17 – $180,000
- 2015/16 – $180,000
- 2014/15 – $180,000
Note that some people may be eligible to use the three-year bring forward rule.
Update: note the potential changes announced in the 2016 Budget.
For the 2016/17 financial year the amount of the superannuation Concessional Contributions cap depends on the age of the member:
- For people who were at least 49 years of age on 30 June 2016 the cap is $ 35,000
- For other people the cap is $ 30,000