A senior academic at the Australian School of Business says that concern over proposals to change the Superannuation tax rules is a "storm in a teacup".
People aged over 50 may be able to rort the tax system if a controversial federal government proposal to extend tax breaks for superannuation contributions goes ahead. Under one option put forward by Treasury, people with more than $500,000 in their funds would be allowed to take out some of the money, to bring them below the threshold, and qualify for the $50,000 contribution cap.
John Evans, Associate Professor and Head of
Actuarial Studies in the Australian School of Business says concerns about tax rorting are overblown, and savers should put more into their super pot. "While some tax advisors claim that some people over 50 could try and reduce their superannuation fund balance to ensure that they can make $50,000 a year in concessional contributions, this is a sideshow and it is not worth wasting valuable Treasury and industry time on. The rule change will apply to very small numbers of people, and indeed, if savers take these measures to ensure they can put more in their super pot, it should be encouraged."
The Australian Superannuation Funds association has expressed serious concerns about the opportunity for manipulation of government measures designed to ensure that older workers can increase their retirement balances.
John Evans has looked at these concerns, and says that attempts to gain the tax deduction by reducing a superannuation balance below $500,000 was self defeating as the retirement benefit would remain essentially static. He says "there is little overall benefit for savers in doing so. All this measure would do would be to defeat the purpose of the Government to encourage those with low retirement accumulations to accumulate more."
Penalty tax as high as 93 per cent applies to contributions that breach the caps, which are currently set at $25,000 a year for those under 50, and double that for those over 50.
Associate Professor John Evans is also Deputy Director of the Centre for Pensions and Superannuation, and has looked at these levels. He says "It is necessary to recognise that $500,000 is not an adequate accumulation, and a lot of people cannot save adequately until later in life, so it seems entirely appropriate to encourage those approaching retirement to save more and reduce the burden on the state."
John Evans is now urging the Treasury to support a return to the structure of a maximum deductible contribution of $50,000 for all those over 50. "Regardless of their accumulated amount, the limit should be set at $50,000, as this is both administratively efficient and economically desirable."