SPAA says raise the caps or exclude non-concessional contributions

• If the annual $50,000 cap can’t be raised for everyone aged 50+, then exclude non-concessional contributions from the mooted $500,000 threshold super balance.

The Self Managed Super Fund Professionals Association (SPAA) has today called for a universal increase in the concessional superannuation contributions limit (cap) to $50,000 a year for all individuals aged 50+, so they can plan a comfortable retirement.

SPAA has recommended that a $50,000 annual cap apply to everyone aged 50+ regardless of their current superannuation balance and has rejected a government proposal to only raise the concessional contribution cap for those age 50+ who have superannuation account balances of $500,000 or less from July, 2012.

“SPAA supports raising the concessional contributions cap for individuals aged over 50. However, SPAA believes an arbitrary and unindexed $500,000 balance threshold would be overly complex and impose unnecessary costs while discriminating against people who make voluntary non-concessional contributions from after-tax dollars,” said Andrea Slattery, SPAA CEO.

She said some people may also mistake the threshold figure of $500,000 as adequate. Recent University of NSW research** shows someone on an average wage of $60,000 a year will need $1.2 million at retirement while someone on $80,000 will need $1.6 million – a sum 20 times their incomes.

“As an alternative to the $500,000 threshold, SPAA has recommended the concessional cap be increased from $25,000 to a suitably higher amount for all individuals over age 50 to give them the opportunity to contribute more to super in the years leading up to retirement,” Ms Slattery said.

“If the Government decides to retain the $500,000 threshold, SPAA recommends that only concessional contributions and investment earnings be counted against it. Given that only concessional contributions and fund investment earnings are subject to concessional tax treatment, SPAA believes only the member’s concessional contributions should count against the $500,000 threshold,” Ms Slattery said.

SPAA fears using an arbitrary threshold superannuation balance of $500,000 will impose onerous reporting obligations and complexities experienced under the former Reasonable Benefit Limit (RBL) system. This appears contrary to the Cooper Review’s focus on improving the efficiency of the system.

“Having an arbitrary $500,000 account balance threshold which is unindexed may also result in an increase in the number of individuals inadvertently breaching the contribution caps,” Ms Slattery said.

The Federal Government has announced the annual concessional cap for those aged 50+ will be permanently increased to $50,000 a year as of July 1, 2012. SPAA’s recommendations regarding this proposal are contained in its submission to Treasury on concessional superannuation contributions caps for individuals age 50+.