The Federal Government has confirmed it plans to increase concessional contributions caps from $25,000 to $50,000 to much industry applause, but the question of how this will be done in a cost-effective manner still remains.
The discussion paper released yesterday by Financial Services Minister Bill Shorten outlines that caps will apply to those over 50 with total superannuation balances below $500,000 from 1 July 2012.
It also presents the eligibility for the higher cap and the methodology for determining total superannuation account balances — the onus of which will fall on the Australian Taxation Office.
“These changes will provide flexibility for those nearing retirement to make additional ‘catch-up’ contributions at the stage in their lives when they are most able to do so,” Shorten said in a statement.
The Financial Services Council (FSC) chief executive, John Brogden, welcomed the proposed changes, stating the decision to double the concessional contribution cap will go a long way to delivering Australians an adequate retirement.
But while the Association of Superannuation Funds of Australia’s (ASFA’s) chief executive Pauline Vamos said that it was great to see changes to public policy, she believed that getting the implementation right was not going to be easy.
“We all agree with the public policy that the cap should be targeted at people with low balances. What we need to figure out is the best way to achieve that,” she said.
“Their lever is easy — just put a $500,000 cap on it. It’s easy to sell and that’s the way to do it with superannuation. But the implementation cost is enormous, and who will bear that cost? Members.”
She pointed to measures outside the superannuation industry, such as the assets test, as viable options for determining eligibility for a higher cap.
