While ‘Utegate' dominated this week's headlines, two highly significant superannuation developments in Canberra didn't seem to get much attention - despite their potential impact on older Australians who are trying to maximise their super savings.
On Monday, the report of the Senate economics committee inquiry into various federal Budget measures, including the halving of concessional super contribution caps from 2009-10, recommended that the Senate pass the relevant tax Bill.
Then on Wednesday, the Senate passed the Bill without amendments, and it is now is waiting Royal Assent.
The committee had accepted Treasury's statement that the halving of the caps would affect less than 2% of fund members making concessional contributions, and those members would be "primarily high-income earners".
In its report, the committee quoted various strong submissions from the likes of the Association of Superannuation Funds of Australia (ASFA), the Investment & Financial Services Association (ISFA) and the Financial Planning Association (FPA) - all expressing concern for older members wanting to catch-up with their super savings.
See the report
The committee referred to various "alternatives or fall-back positions" to the halving of the caps that were suggested in various submissions, including:
- Removal of superannuation guarantee (SG) contributions from the concessional contributions cap.
- Provision for members to carry forward their unused concessional contribution caps from their final 10 years before retirement. In other words, a member who will retire at 65 would be entitled before retirement to take advantage of any unused caps since turning 55.
- Higher-cap for members with low balances.
- Permanently higher caps for members over 50.
- Grandfathering provisions to preserve the position of members who exceed the new caps because of an employer's general remuneration policy or an industrial award or agreement that could involve making employer contributions above the 9% SG contributions.
Particularly given the rapid ageing of Australia's population, governments, fund managers, superannuation funds and advisers will have to think more innovatively about the best ways to provide retirement income.
However, any changes to the super regime in future should ideally involve careful fine-tuning that will progressively build greater confidence in the system.