Michael Hallinan

Capping super in pension phases is a solution to a legacy issue that has passed.

The problem with capping the amount of super which can enjoy tax free earnings in “pension phase” is that it is a solution to a legacy problem which is not likely to have in the future.

Before July 2007 there were limits on the amount of benefits which could be taken on a concessionally taxed basis (the old Reasonable Benefits Limits regime) but no limit on the amount of undeducted contributions which could be made.

Currently we have the reverse – limits on the amount of undeducted contributions which could be made and no limits on the amount of benefits which can be taken on a concessionally taxed basis.

Uber SMSFs ($10m plus in asset value) became Uber as a result of the Pre July 2007 system.  It is very difficult to contribute sufficient monies under the current system to create an Uber SMSF.

If an individual could contribute the maximum contribution each year for 40 years: the total contributed amount would be $8.2m ($180,000 plus 85% of $30,000).  Obviously there would be earnings to add but a real return of 2.55% (3% gross less 15% tax); this may produce $14.5 m (present day dollars).

Realistically how many people at age 25 could contribute to super $205,500 each year for 40 years?

The latest ATO stats suggest that there are 22,000 SMSFs which have assets greater than $10m.

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