The Association of Superannuation Funds of Australia (ASFA) is encouraging the Federal Government to consider expanding access to the exemption from the contributions work test to individuals with a total superannuation balance under $500,000.
In its submission to Treasury, the superannuation body said it strongly supports measures that will improve retirement outcomes for all Australians and was pleased the Government is proceeding with its Budget commitment to provide an exemption from the contributions work test for recent retirees with low superannuation balances.
“However, while we welcome the measure, ASFA is concerned that the implementation and administration of the exemption and related amendments to the contribution cap arrangements will involve unwarranted complexity for individuals and impose a significant compliance burden and cost on superannuation providers and the Australian Taxation Office (ATO),” ASFA said.
“Significantly, the proposed criteria for accessing the exemption introduce a new monetary threshold (total superannuation balance of less than $300,000 as at the previous 30 June) as well as a new restriction to the already complicated rules for accessing a ‘bring forward’ of an individual’s non-concessional contributions cap.
“This will potentially create complexity for individuals, making it difficult for them to understand what amount they can contribute to superannuation.”
ASFA said the added complexity may potentially act as a disincentive to the very group the exemption is intended to assist, that is, those with low superannuation balances, who have the greatest need to increase their retirement savings.
“We anticipate that many individuals would require financial advice to fully understand the implications of the exemption, yet the exemption is targeted at individuals with modest superannuation balances who are, in ASFA’s view, unlikely to seek advice,” the submission said.
“ASFA encourages the Government to consider expanding access to the exemption to individuals with a total superannuation balance under $500,000. As well as reducing complexity (by avoiding the introduction of an entirely new threshold into the contribution rules), this would enable a greater number of individuals to take up the opportunity to increase their superannuation savings ahead of retirement.”
