A recent speech delivered by Minister for Financial Services and Superannuation Bill Shorten contained veiled hints of further cuts to superannuation, according to Tria Investment Partners’ managing partner Andrew Baker.
Addressing the Conference of Major Superannuation Funds last week, Mr Shorten referred to super as being for the middle class – a comment Mr Baker said means “super is not for everyone”.
Mr Shorten said superannuation was “never designed as a welfare tool for low income earners – that is appropriately the preserve of the aged pension”.
He added that for those with the means, voluntary savings above and beyond superannuation was another pillar of retirement savings. “This was to be concessionally taxed within a reasonable benefit limit,” he said.
Super is intended for the middle classes with a goal of 70 per cent of pre-retirement income, he added.
The comments hint at future revenue measures in the coming Budget and beyond, according to Mr Baker.
“I haven’t heard a reference to [reasonable benefit limits] in some time,” Mr Baker wrote in his latest Trialogue commentary.
They amounted to “a horrendously complicated system which was scrapped by the Howard Coalition government” in favour of concessional caps – which were then reduced by the Rudd and Gillard governments, Mr Baker said.
The speech hints at further reductions in contributions tax concessions for high income earners. “Currently reduced at $300,000, we think this could be brought down to the top marginal tax rate which kicks in at $180,000. This is about 2.5 times average earnings, which would align with the reference to super being a middle class construct,” Mr Baker said.
He also predicted a reintroduction of reasonable benefit limits in some form.
“There have been hints in the financial media of new taxes on balances above figures ranging from $800,000 to $1 million, which have been attacked for being arbitrary,” he said.
An argument is being developed that super should not be where multi-million dollar balances – beyond what would be considered adequate for a comfortable retirement – can be accumulated in a tax-concessional environment, Mr Baker continued.
“Expect some interesting (and probably unpleasant) surprises for super in the Budget. These may never come to pass, of course, if we get a change of government later this year, but some of it will probably stick,” he said.
