Govt short on super concessions: seniors

A SENIORS lobby group says the federal government has fallen short on boosting the cap on superannuation concessions for retirees.

Treasurer Wayne Swan announced on Friday potential changes to tax earnings on superannuation would affect around 16,000 retirees.

Among the measures are a tax exemption on superannuation earnings supporting pensions and annuities to be capped at $100,000, and anything above that level taxed at a rate of 15 per cent.

The measures would affect those with superannuation assets worth more than $2 million.

National Seniors chief executive Michael O'Neill says his group welcomes the government's plans but says they have fallen short in the amount retirees can contribute to their retirement savings without extra penalties.

Mr O'Neill says the $5000 increase in the $25,000 superannuation concession cap for people aged at least 60 is welcome.

"But it is still $20,000 short of the $50,000 cap average earners had counted on last year and the government had promised for 2014," he said in a statement.

The cap was halved in 2011 and extended for two years. It had been expected to rise to $50,000 in 2014 for people aged 50 and over.

Left-wing think tank, the Australia Institute, said the government has failed to cut the cost of tax concessions on superannuation by one per cent.

Institute chief executive Richard Denniss said tax concessions for superannuation were the fastest growing expense in the federal budget and the government had done little to fix the system.

"Today's announcement will do nothing to stop the cost of tax concessions doubling in the next five years and does not address the bizarre nature of the scheme that delivers more to the top 10 per cent than it does to the bottom 60 per cent," Dr Denniss said.

Treasury has estimated the tax concessions on super would cost the budget $32 billion this year and $45 billion by 2015, yet the changes would collect under $250 million in extra revenue.

Australian Greens leader Christine Milne said there should be a more equitable distribution of super tax concessions.

"But the government's mishandling of the issue has unnerved the whole community and made having a sensible discussion about reforming tax concessions almost impossible," she said.

Senator Milne said the government need to fix the mining tax, now that it had retreated from super reform, to fund policies such as education and health care.

The Financial Planning Association (FPA) said it understood the superannuation system needed to become sustainable, with more baby boomers retiring.

"Whilst we do not support increases in superannuation taxes we understand the changes are needed to obtain sustainability and certainty for the retirement system," FPA chief executive Mark Rantall said in a statement on Friday.

Mr Rantall applauded the establishment of the Council of Superannuation Custodians, as it would remove superannuation from the annual federal budget cycle and allow an independent body to set policy for the system.

A national lobby group for seniors, COTA Australia, said older Australians would receive a better deal from the measures announced on Friday.

"Seniors will welcome the superannuation changes as they increase fairness and will assist those on lower incomes," COTA Australia chief executive Ian Yates said.

Mr Yates said it would end the concerns seniors felt amid speculation about what could happen to their retirement savings.

Wealth manager Challenger Limited said the proposals should address the emerging concerns about the impact Australians living longer will have on the population and governments.

"All Australians need secure lifetime retirement income and many could be retired for 25 years or more," Challenger chief executive Brian Benari said in a statement.

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Tax on super earnings over $100K

LABOR will raid Australia's superannuation accounts to plug its revenue hole, with earnings over $100,000 to be taxed under a plan unveiled today.

Treasury estimates around 16,000 Australians will be affected by the measure in 2014-15 which represents 0.4 per cent of Australia's projected 4.1 million retirees in that year.

Superannuation Minister Bill Shorten and Treasurer Wayne Swan this morning revealed Labor would cap the exemption for earnings on superannuation assets supporting income streams at $100,000 with a concessional tax rate of 15 per cent to apply after that. 

Tony Abbott immediately hit out at the planned reforms describing them as “another broken promise” that would result in less money in the pockets of Australians.

The changes would affect individuals with around $2 million of savings in superannuation and will take effect from July 1 next year.

"We want to make it better, we want to make it fairer and we want to make it stronger," Mr Swan said of the superannuation system.

The measures -- which will also hit politicians -- will bring in around $900 million in savings for the federal budget over the forward estimates.

Mr Swan said there was "something wrong" with the system that everyday working Australians weren't getting the best deal from superannuation.

Mr Shorten said "we want to take superannuation above politics".

"We believe the system should be targeted at everyday earning Australians," he said.

Deputy Prime Minister and Treasurer, Wayne Swan and Minister for Financial Services and Superannuation Bill Shorten holding a press conference at Parliament House in Canberra. Picture: Smith Kym

"We all know that concessions can't be open ended.

"Once you've achieved a comfortable level in retirement savings, you probably don't need as much as those who haven't gotten to that point."

He said the changes "were not retrospective".

"Vigilance dictates that we must make these hard changes," Mr Shorten said.

Click on this link for the full announcement details.

People aged 50 and over will also get a boost to the tax free additional contributions they can make from $25,000 to $35,000.

However the measures may not even go to the parliament before the next election.

“We will do what we can in the time available before the next election," Mr Shorten said.

Tony Abbott today said the new measures were“yet another hit on Australian people”.

Share the anguish of columnist Joe Hildebrand, who painstakingly avoided talking about superannuation... until now.

The Opposition Leader said people would ultimately have less money as a result of the flagged changes.

“This is a government that is incompetent and untrustworthy,” Mr Abbott said.

“This is a government which is prepared to tax the people to fund own spending.”

He said if re-elected there was no guarantee Labor would stop at the measures announced.

“If they get three more years they will go further – it wont stop here,” Mr Abbott said, maintaining there would be no adverse, unexpected changes to superannuation under a first term of a Coalition government.

Under current arrangements on superannuation, all earnings on assets supporting income streams are tax free in contrast to earnings in the accumulation phase of superannuation which are taxed at 15 per cent.

As part of other changes today Labor will also establish a special Council of Superannuation Custodians to ensure any future changes to the sector are consistent with the agreed Charter of Superannuation Adequacy and Sustainability.

It will work to simplify the design and administration of the higher concessional contributions cap, reform the treatment of concessional contributions in excess of the annual cap, extend normal deeming rules to superannuation account-based income streams, extend concessional tax treatment to deffered lifetime annuities and further reform the arrangements for lost superannuation.

Asked if the changes would help fund the Gonski education reforms and the National Disability Insurance Scheme Mr Swan said it was one of many savings that would help bring back revenue.

"You do create room in the longer term for policy proposals," Mr Swan said.

"There is no magic wand or one area of savings that will instantly change the fact that revenues have come off dramatically."

Speculation over the government’s planned raid on superannuation hit fever pitch this week.

The reforms were due to be part of next month’s federal budget.

The Association of Superannuation Funds of Australia today welcomed the government’s announcement.

The organisation’s CEO Pauline Vamos said it would help stop the panic in the community and allow people to better plan for their retirement in an environment of stability and certainty.

"We have been calling on the government to put a stop to the hysteria and consider policies which take a long-term approach to the future sustainability of Australia's superannuation system,” Ms Vamos said.

She said there was a lot of complexity in the changes which needed to be considered carefully.

“We will examine these proposed changes in detail to ensure they deliver the best outcomes for the sustainability of the system and a comfortable retirement for all Australians."

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