Superannuation reforms to hit older workers, women
The Federal Government's watered down superannuation changes that were announced late this week are likely to be a blow to older workers and women.
The final release of the proposed changes saw the government seek to recoup the cost of its backwards step on the proposed reform to the non-concessional cap by making two other amendments that will largely impact women and those aged between 65 and 74.
Firstly, the proposal to repeal the work test for people aged between 65 and 74 years will not go ahead. This is despite the draft regulation to repeal the work test having been released last week for public comment.
The measure - which has now been dumped - would have harmonised the rules for older workers with those applicable to taxpayers under the age of 65.
It is expected that scrapping this reform will to save $180 million over the forward estimates.
Secondly, the government has also deferred the proposal to allow catch-up concessional superannuation contributions. This will have the biggest impact on women who would of used the measure to catch up on superannuation contributions after taking time out from the paid workforce.
The proposal to allow unused concessional cap balances to be carried forward for up to five years, has been deferred to July 1, 2018, saving about $400 million over the government's forward estimates.
The changes are the result of the government trying to recoup funds after announcing that it had dumped its much-touted $500,000 lifetime cap on after-tax super contributions, which was to be backdated to 2007.
Instead, it has been replaced by a new measure that reduces the existing annual non-concessional contributions cap from $180,000 per year to $100,000 per year, with a three-year bring-forward, until a lifetime cap of $1.6 million is reached.
Treasurer Scott Morrison this week revealed the revised plan, which will leave the pre-budget rules in place until June 30, 2017. As a result, a rush on super contributions by wealthy savers its tipped before the end of the financial year.
The change to the proposed reform to the non-concessional cap is estimated to cost the budget $400 million over the forward estimates - money which will be recouped by the modifications to the two reforms listed previously.
A joint statement by the Treasurer Scott Morrison and Minister for Revenue and Financial Service Kelly O'Dwyer stated: "In order to fully offset the cost of reverting to a reduced annual non-concessional cap, the government will now not proceed with the harmonisation of contribution rules for those aged 65 to 74.
"While the Government remains supportive of the increased flexibility delivered by this measure, it can no longer be supported as part of this package, without a net cost to the budget.
"Individuals aged 65 to 74 who satisfy the work test will still be able to make additional contributions to superannuation. This will encourage individuals to remain engaged with the workforce which is of benefit to the economy more generally.
"In addition, the commencement date of the proposed catch-up concessional superannuation contributions will be deferred by 12 months to July 1, 2018, to ensure the full cost of changes to non-concessional contribution arrangements are met over both the forward estimates and the medium term."
Fact sheets on the government's superannuation changes are available at www.treasury.gov.au/SuperReforms.