$500k cap tipped to be on the chopping block
In light of speculation that the government’s budgetary super measures are set to be watered down, several voices in the industry believe it’s the $500,000 lifetime cap on non-concessional contributions which will be most radically adjusted.
Over the weekend, Prime Minister Malcolm Turnbull left the door open to changing the government’s super tax proposals as announced in the federal budget.
“The reforms are important, but obviously in the implementation and transition there is work to be done,” Mr Turnbull said.
The $500,000 lifetime cap, which was particularly “unpalatable” for some, is a likely target if the government is looking to soften its stance, according to senior manager for strategic advice at Perpetual, Colin Lewis.
“Particularly since there’s an argument that it’s retrospective,” Mr Lewis said. “Hopefully, everyone might get one last bite of that cap and maybe it’ll be prospective rather than retrospective.”
Mr Lewis noted there are several administrative areas that could cause headaches across the industry. One of these areas is the government’s proposal for the cap to come into effect from 7.30pm on budget day.
“Some funds are saying that is going to be difficult to administer so I would say that 1 July would be the date,” he said.
“Measures can be changed... so there’s a real possibility, particularly if there’s a backlash from the backbenchers or the conservatives in the Coalition, because they’re making a lot of noise about it.”
Mid-tier firm Crowe Horwath’s Samantha Comer believes more carve-outs may be on the horizon for the $500,000 cap, including for divorced couples, farming families and those receiving inheritance from deceased estates.
“It’s going to be extremely hard for [Mr Turnbull] to apply any change retrospectively, given the fact there’s 12 senators that are non-aligned effectively. Labor was pretty firm that they didn’t like the retrospective approach. Most of the 12 senators are pretty firm they don’t like the retrospective approach,” Ms Comer said.
Assistant Treasurer Kelly O’Dwyer has already announced an exemption to the cap for superannuation members with personal injury payouts and Treasurer Scott Morrison has provided relief to those with LRBAs under way before budget night.
SuperConcepts’ general manager for technical services and education, Peter Burgess, told SMSF Adviser that the issue of UK pension transfers needs to be addressed.
“The $500,000 lifetime cap on concessional contributions may limit the opportunity for many Australians to save for retirement and achieve a dignified retirement,” Mr Burgess said.
“We support measures which enable individuals to save for retirement and are encouraged by recent speculation that certain transactions will not be penalised if they result in the excess. We would add UK pension transfers, which were pending as at budget night, as another category of transactions which should not result in an excess.”
