Shock News: $23 Billion Reasons Why Contributions to SMSFs Have Dropped

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An astonishing $23 billion drop in contributions to self-managed super funds (SMSFs) has been revealed, raising urgent questions about the future of Australia’s retirement savings system.

Data from the Australian Prudential Regulation Authority by Rainmaker Information revealed that contributions to SMSFs amounted to $38 billion in 2016-17. The decrease in employer-provided voluntary contributions caused the decline, whereas the mandatory contributions from employers did not change.

The analysis indicates that the Coalition’s transfer balance cap has effectively reduced the growth of high-balance superannuation accounts. The SMSF Association is using these figures to argue against implementing additional limits.

The Albanese government plans to place a $3 million limit on the amount of money that can be held in workers’ accumulation accounts that receive favourable tax treatment at a 15% tax rate, further limiting this treatment.

According to Alex Dunnin, the executive director at Rainmaker, the SMSF sector has been significantly impacted by the transfer balance cap. The recent $3 million limit could further contribute to the decrease in voluntary contributions.

“After the 2017 tax shock, it took two years for the segment to recover and grow again,” he said.

He stated that although voluntary contributions have increased steadily over the past five years, the suggested cap of $3 million could significantly impact the sector.

“Many people believe that setting up a self-managed super fund (SMSF) can help to reduce taxes. As these funds grow, the $3 million tax cap will likely affect them,” Dunnin stressed.

Peter Burgess, the CEO of the SMSF Association, asserted that the Rainmaker figures demonstrate that the caps implemented in 2017 are adequate. Therefore, there is no requirement for Labor to impose additional limitations.

“Setting a limit of $3 million might harm confidence in the system,” Burgess said.

“To encourage voluntary contributions to super, we need to establish stability in the rules to provide certainty to the contributors.”

It is clear that the drop in contributions to SMSFs, totalling $23 billion, raises serious concerns about retirement savings in Australia. With stability and certainty in the superannuation rules, it may be easier for Australians to make informed decisions about their future. Governments need to consider these facts when making policy decisions related to superannuation.


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