Budget proposals 'in the lap of independent senators'
The 2016 federal election has created massive uncertainty for older Australians looking to build their retirement assets, says one financial advice firm.
Dixon Advisory founder Daryl Dixon said the greatest uncertainty surrounds the proposal to limit, from budget night, future non-concessional contributions by counting contributions made since 1 July 2007 towards the lifetime limit.
“Presumably the backdating of the lifetime limit to 2007 was intended to stop people who had previously deposited more than $500,000 of personal after-tax money making more contributions,” said Mr Dixon.
“The fate of the budget proposals is now in the lap of the gods or, more accurately, the independent senators.”
After the budget, and throughout the election campaign, this was a controversial position for several reasons, including the proposal's harsh impact on people with relatively small amounts in super.
“For example, many people using the highly popular re-contribution strategy to transfer balances to their partners or improve their fund's tax status would be deprived of the opportunity to build up their super,” he said.
“Even if the proposed change wasn't backdated to include contributions made since 2007, a lifetime cap of $500,000 on non-concessional contributions would still penalise people not receiving large employer super contributions during their working life.”
Mr Dixon argued that if the government’s objective is to limit the amount future retirees can have in super, a simple and effective change would be to limit or prevent future contributions to those accounts with large balances, such as the proposed $1.6 million cap on pension accounts.
“While there is still complete uncertainty about what the future rules will be, people can still proceed to draw their pensions and contribute concessional money to super under current arrangements for this financial year,” he said.
“The sad thing for all super fund members is that coming just after Brexit, a political gridlock is likely to have an adverse impact on investment returns. Another year of low or modest investment returns is a distinct possibility, especially if the federal Parliament is paralysed for an extended period.”