SPAA says Budget fails to adequately address excess contributions problem

SPAA believes measures do not go far enough and will deny middle Australians the opportunity for saving for a comfortable retirement

The Self-Managed Super Fund Professionals’ Association of Australia (SPAA) has today acknowledged that the Federal Budget has begun to address the excess superannuation contributions problem which results in high penalty taxes for Australians saving for retirement, but believes the measures announced fall way short of a sensible, working solution to rectify the problem.

Under the measures, the Government will provide eligible individuals with the option to have excess concessional contributions taken out of their superannuation fund and assessed as income at their marginal rate of tax, rather than incurring excess contributions tax. This measure will apply where an individual has made excess concessional contributions of up to $10,000 in a particular year and will only be for breaches in 2011-12 or later years, and only the first time the breach occurs.

“This is a positive step aimed at reducing instances of inadvertent concessional cap breaches but this measure provides no relief to individuals who may have incurred excess contributions tax in 2007/08, 2008/09, 2009/10 and 2010/11 financial years,” said Andrea Slattery, SPAA CEO. “It will also provide no relief for individuals who inadvertently breach their non-concessional cap either before or after 1 July, 2011,” she said.

“SPAA believes this measure will result in more middle Australians being caught by inadvertent errors as they try to make legitimate moves to save for a comfortable, self funded retirement.”

SPAA noted that the superannuation contribution caps will remain at their current levels despite repeated calls by SPAA and others for the caps to be restored to their pre 1 July 2009 levels.

“This is disappointing as the 50% reduction in the concessional contribution cap which was announced in the 2009 Federal Budget continues to deny many thousands of Australian, who typically have a greater financial capacity to save for their own retirement later in life, the opportunity to do so,” said Mrs Slattery.

Mrs Slattery said SPAA supported the Government move to allow for the $25,000 in additional concessional contributions to apply to the indexed $25,000 concessional cap for the over 50s from July 2012, but was disappointed the $500,000 threshold would not be indexed.

“This measure is a step in the right direction, but the fact that the $500,000 threshold is unindexed means that each year, fewer middle Australians will qualify for access to the higher annual superannuation caps needed to save for a comfortable retirement, and is a short-sighted move,” Ms Slattery said.

In other Budget measures, SPAA welcomes the announcement that the Government will reduce the pension drawdown to 75% of the minimum amount for account based, allocated and market linked pensions for 2011/12.