Superannuation reforms now set in stone
THE Turnbull Government's superannuation reforms have become legislation, after the Federal Parliament voted on Wednesday to accept the package of changes.
The government claims the new package will give the budget a net saving of $3 billion by limiting concessions for wealthy savers and making the system fairer and more sustainable.
Under the new rules, the annual cap on non-concessional contributions will drop to $100,000, until the lifetime balance cap of $1.6 million is reached.
From July 1, 2017, the annual cap on concessional super contributions will also be reduced to $25,000.
However, wealthy savers still have a chance to add up to three years' worth of non-concessional contributions, or an extra $540,000, into their super fund before the July 1, 2017, deadline.
The Australian Council of Social Service was quick to welcome the changes, which it said would rein in the most excessive superannuation tax breaks for wealthy retirees.
ACOSS CEO Dr Cassandra Goldie said: "These reforms mean that people can no longer claim tax breaks on funds of more than $1.6 million in their super accounts, or annual contributions above $25,000.
"By cutting annual non-concessional contributions to $100,000, they also make it harder for wealthy people to use superannuation to shelter their income and assets from tax.
"We particularly welcome the government's rebate on contributions for people on low income, which retains Labor's low income super contribution in a different form.
"This will help people who genuinely need more public support for a decent retirement."
However, Dr Goldie went on to say that the changes should only be the beginning of reforms, as tax avoidance opportunities for high income earners remained.
"People can still shift their income and assets into super and avoid tax completely - unlike almost any other type of investment - once their fund starts paying them a pension.
"Even with the $1.6 million cap on super assets in place, a retired couple can still receive a tax-free annual income of up to $138,000. Super fund earnings such as interest and dividends ought to be taxed at 15%, not zero.
"Special tax breaks based entirely on age should be replaced with rebates limited to people receiving a government pension or allowance. This would save $850 million a year according to the Grattan Institute."