DROPPING $500K CAP – A PLUS FOR RETIREMENT PLANNING

The Government’s announcement to scrap the backdated limit of the $500k lifetime non-concessional cap on superannuation is good news for retirement income planning according to the Institute of Public Accountants (IPA).

“The Government has realised that moving the goal posts has warranted a policy rethink,” said IPA chief executive officer, Andrew Conway.

“However, we are disappointed that the drop in the non-concessional cap has been traded off for other simplification measures that were proposed such as the abolishment of the contributions work test for those aged 65 to 75.

“Removing the complexities associated with applying the work test for individuals aged 65 to 75 would have simplified and improved the flexibility of the superannuation system.

“The other proposed superannuation reform measures which may have survived the trade-off include:

• The abolishment of the income test (10 per cent rule)
• The increase in the income threshold for the purpose of the low income spouse tax offset
• The introduction of the Low Superannuation Tax Offset (LISTO) which seeks to effectively return the tax paid on concessional contributions

“The introduction of LISTO is in fact a name change from the Low Income Super Contribution (LISC). We support this measure on equity and fairness grounds.

“Enshrining the objective of superannuation in legislation, which the IPA has long advocated for, is also an important step forward. However, we are concerned with the draft in its current state.

“The primary objective ‘to provide income in retirement to substitute or supplement the age pension’ places the focus of superannuation entirely on the age pension.

“The objective of superannuation also needs to focus on the two other pillars of our retirement system namely superannuation and other voluntary savings,” said Mr Conway.