Lobbying by Australia’s superannuation sector was behind the federal government’s decision not to legislate select measures under proposed changes to the country’s $1.5 trillion superannuation system.
Financial Services and Superannuation Minister Bill Shorten yesterday said feedback from the sector regarding changes to concessional contributions caps played a large part in the government’s ultimate decision.
Since July 2007, concessional and non-concessional super contributions have been subject to annual limits. For the 2013 and 2014 financial years, the cap for all individuals is the general cap of $25,000.
In April this year, the government announced it would introduce a temporary higher cap of $35,000 for 2013/14 for people aged 60 and over and $35,000 for 2014/15 for those aged 50 and older.
The higher cap would then cease when the general concessional cap reached $35,000 by way of indexation.
“The higher cap will encourage individuals to improve the adequacy of their retirement savings at a time in their lives when they are often better placed to make additional contributions to their superannuation,” Shorten said in an exposure draft of the legislation for superannuation concessional contributions caps.
“In addition, it recognises that older Australians may not have received superannuation contributions throughout their working life and their superannuation balances may have reduced significantly as a result of the global financial crisis.”
He said the temporary higher cap of $35,000 replaced the previously announced general cap of $25,000 that was to apply from 1 July 2014.
Under this cap, people aged 50 and over with superannuation balances below $500,000 could contribute an additional $25,000 above the general cap amount.
“The government decided not to legislate this cap in light of feedback from the superannuation sector that the balance requirement would be difficult to administer,” Shorten said.
The government would introduce legislation that allowed individuals to withdraw any excess concessional contributions made from 1 July 2013 from their superannuation fund without penalty, he said.
In line with the changes, the government will also bring forward the start date for the new higher concessional contributions cap to 1 July 2013 for people aged 60 and over.
Under the changes, individuals aged 50 and over will be able to access the higher cap from 1 July 2014.