Should We UnCap Super?

Placing a lifetime cap on voluntary superannuation contributions could actually end up costing more money to the budget, a report by the Parliamentary Budget Office (PBO) commissioned by the Greens found.

The Greens commissioned the report in light of the growing number of voices advocating for a lifetime cap on voluntary contributions, as well as reports that Treasury is considering the measure.

PBO research found that placing a lifetime cap of $500,000 on voluntary, non-concessional super contributions would allow the government to raise $165 million over four years.

However, the cost of superannuation tax concessions is set to be about $170 million over the same period.  My feeling is that we need to remove the caps and encourage people to contribute to superannuation however it could be at too much of a cost to the Government.

“PBO analysis suggests a higher lifetime cap might in fact cost the Budget more than we’re currently paying in super tax breaks,” Greens Treasury spokesperson Adam Bandt said.

“It is good that the Government is reportedly considering superannuation reform, but a lifetime cap on voluntary super contributions is unlikely to generate the kind of savings we need to address the growing cost of unfair super tax breaks,” he added.

Instead, the Greens are proposing to raise over $10 billion by applying progressive tax rates to superannuation contributions.

“For a long time now the Greens have pushed for reform to end superannuation being used as a vehicle for tax minimisation, which it was never intended to be,” Bandt said.

“We need to do much more to end the unfairness in our super system to make sure it properly looks after people in their retirement.”

Commenting on superannuation taxation, SMSF Association chief executive Andrea Slattery said: “Voluntary contributions are supported by tax incentives to encourage people to sacrifice their income today for savings that can be used in retirement.”

She also warned against “the constant threat of legislative change” and said: “It’s also important that the Government commits to a rethink about how to cost superannuation tax incentives. We believe it is almost impossible to have a sensible policy discussion when we do not have a clear picture on how the superannuation tax incentives benefit Government over the long term.”

Source : Financial Standard 23/11/15 Laura Millen