Super Balance Cap Could Destabilise Australia’s Retirement Savings System, Says TSA

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Tax and Super Australia (TSA) said that introducing a super balance cap is risky and could destabilise thousands of Australians’ retirement savings.

According to Natasha Panagis, the head of superannuation at TSA, putting a cap on superannuation balances would increase complexity and ambiguity, discouraging retirement planning.

“Changing the law will undermine consumer confidence in the superannuation system,” she said. “The stability must reassure Australians of the superannuation system from not seeing any further significant changes.

“This will allow them to better plan their retirement strategy knowing the rules won’t change over the short or long term.”

She also claimed that the proposal conflicted with Dr Jim Chalmers, the Treasurer’s pre-election declarations that Labor would not introduce taxes or super balance limitations.

By emphasising the size of some self-managed funds and their financial burden, the Albanese administration has pushed back reforms to the tax on superannuation.

Assistant Treasurer Stephen Jones stated that the largest self-managed super fund, which has assets above $400 million, is one of 32 with more than $100 million in assets.

“The objective of super is to provide a tax-preferred means for estate planning. You could say it is doing its job,” Jones told the AFR Wealth and Super Summit in Sydney.

To save the government’s budget an estimated $1.5 billion annually, several lobby groups have proposed capping superannuation accounts at $5 million.

However, Phil Broderick, a TSA board member and the chair of the Superannuation Technical and Policy Committee, claimed that most of the funds’ large balances were a holdover from earlier, more generous contribution regimes and that only a small number of funds had credits that high.

“This small cohort of large account balances are the exception rather than the norm,” he said. “They exist due to the superannuation policies that were around in the past.”

“Changing the law and applying the change on a retrospective basis will penalise individuals who adhered to the rules that existed at the time.”

A super balance cap would have potentially devastating consequences for the retirement savings of many Australians. Not only could it destabilise the entire system, but it could also deprive many lower-income retirees of much-needed retirement funds. 

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