The AFR’s Phillip Coorey has reported today that the Turnbull Government is planning to include significant ‘carve-outs’ to its $500,000 lifetime cap on non-concessional superannuation contributions in a bid to appease conservative members in his own party – a move that could cost the Budget up to $400 million over four years:
…sources have confirmed that when the government releases the draft legislation, there will be exemptions to the cap if there were “life events”, classified as one-off windfalls. These would include an inheritance, a divorce settlement, or eligibility for a trust payment. Life events would not include people transferring investments from elsewhere into their super to receive a lower tax rate.
Other exemptions would apply to people with self-managed super funds who, for example, had contractual arrangements made before the May 3 budget, when the change came into effect, to use their fund to buy a property and needed to put extra funds in their account for the purchase.
While I accept that there may be cases where exemptions should be granted – for example if contracts were signed just before the 3 May Budget – I fail to see why windfalls like inheritances should be exempted from the $500,000 cap.
If someone has already contributed up to the $500,000 cap and is fortunate enough to then receive, say, a significant lump-sum inheritance, then why should they be permitted to receive further taxpayer support via the tax-free environment provided to their savings?
Is it really too much to ask that someone in their fortunate financial situation be required to pay a measly 15% concessional tax rate on the amount of super that breaches the cap?
There is also the complexity issue. The more carve-outs that are included to the $500,000 cap, the more complex the administration will be.
Sadly, Labor continues to take the low ground on this issue, maintaining its fugazi argument that the $500,000 cap is somehow “retrospective”:
“We remain and will remain deeply concerned and opposed to aspects of retrospectivity, as do several members of the Liberal Party,’ Mr Bowen will say on Thursday.
“As a matter of urgency, the government should resolve this area of their policy.
“Labor will work constructively with the Prime Minister and the Treasurer to ensure that changes to superannuation are not retrospective”…
Earth to Labor: read the ABC Fact Check’s comprehensive debunking of the “retrospective” claim and stop playing silly politics with this important issue.
