Super shake-up targets wealthy, helps the young

With the controversial new 15 per cent tax on amounts above $3m yet to be set in stone, the economic summit, which kicks of on August 19, will hear calls to cut benefits for the very wealthy but also to improve super benefits for younger savers.

The Commonwealth Bank and the Grattan Institute have already supported wealth taxes for older and richer investors.

But those calls are now being balanced with a push to let younger, less wealthy investors gain more access to super through increased contribution caps.

Top advisory firm BDO Australia has sent a shot across the bows with a provocative call to open up the amount investors are allowed to contribute into super each year.

At present, the pre-tax contribution limit is $30,000 per annum – an amount unchanged from a decade ago.

In contrast, the amount older and wealthier Australians can have tax-free in super is $2m – up from an initial level of $1.6m when it was first legislated in 2017.

Similarly, the post-tax contribution limit is $110,00 amount compared to levels of $180,000 in the past.

Lance Cunningham, BDO national tax technical leader, said the current settings are inappropriate.

“They offer limited opportunity for people to contribute at the time they most want to do so,” Mr Cunningham said.

Super policy is becoming more central to the agenda as the government publicly eliminates other items from the debate, including negative gearing.

At the same time, items related to super such as capital gains tax, pension access and family trust rules remain very much in focus.

The summit is due to commence before the government nails down the final terms of the new super tax, tagged as Division 296.

The prospects of the introduction of the tax being delayed are rising since the government is supposed to begin collecting tax revenue from the measure from July 1 next year with guidance on the treatment of unrealised gains still to be clarified.

Two other key issues in super will also be difficult to avoid at the summit, despite a formal focus on productivity:

• The regulation of super is back in the spotlight. The lack of a single regulator for super has emerged as a problem for the government in the wake of the First Guardian scandal, now shaping up as the biggest regulatory failure for many years.

Supervision of super is split between three regulators: ASIC, APRA and the ATO. Following the First Guardian collapse, The Australian reported last week that ASIC has raised the prospect of limiting superannuation investment options and restricting retail access to high-risk funds, as it warned a root-and-branch response is needed to counter financial services industry misconduct.

• Separately, lobbyists from big super funds are pushing the government to review the terms of the performance test in MySuper.

Last year, all of the MySuper superannuation funds passed the APRA Your Future, Your Super performance test for the first time, but industry leaders believe conformity in the tests is leading to a lack of innovation in super products.

There are now calls for the APRA to broaden the scope of the performance tests to ensure it captures more products and allows for diverse strategies across the sector.

This article first appeared in The Australian as Calls for a better deal for those lower on the savings ladder