The government could help Australians better save for retirement by increasing annual concessional super contribution caps and solving the problem of collecting excess, an industry group says.
The Australian Tax Office has collected $300 million in excess superannuation contributions tax since 2007 from individuals, 61% of whom are low to middle income earners, the Self Managed Super Fund Professionals’ Association (SPAA) said in a statement on Friday.
SPAA chief executive Andrea Slattery, an attendee at this week’s government Tax Forum, said both measures are critical to help Australians save for retirement, reduce reliance on the aged pension and restore confidence in the superannuation system.
“The SMSF sector is characterised by taxpayers who largely look after themselves,” Mrs Slattery said. “This group includes the self-employed, small business owners, professionals and primary producers and, as a consequence, they are the least likely to look to government for support in retirement. SPAA believes the review of Australia’s Taxation System should recognise this and ensure that any proposed changes encourage the community to reduce reliance on government support in retirement.”
In its Tax Forum Statement of Reform Priorities, SPAA proposed that the standard concessional contribution caps for all those aged over 50 be raised to $35,000 from $25,000 in the short-term.
“In SPAA’s view, the current, excessively low concessional contribution cap represents a significant barrier to voluntary savings under pillar three (voluntary savings) of our three-pillared retirement income system,” Mrs Slattery said.
She said this measure would replace the proposed change to legislation that would see the cap raised to $50,000 for those with a super balance of $500,000 or less. And while the changes would cost the government in the short-term, they would eventually pay off by reducing the level of retirees’ dependence on government hand outs.
Mrs Slattery said it was also crucial that the ATO resolve the issue of excess collection of super contributions tax, which has significantly dented the savings of low to middle income earners.
SPAA also advocates the removal of disincentives for those aged 65 and over who wish to continue contributing to superannuation, including an extension of the three-year bring’-forward rule, and the removal of the superannuation work test for those aged between 65 and 75.
The association also support the proposed increase in the Superannuation Guarantee to 12% from 9% and the introduction of a contributions tax rebate for low income earners as proposed.
The government will be conducting focus-group sessions with SMSF trustees this month to identify issues that will help shape the government’s administration of superannuation in the coming years. The sessions will be held on Thursday 13 October in Sydney and Monday 17 October in Melbourne. To take part, email email@example.com by Tuesday 11 October.