Tax expert questions super cap given retirement age change
A QUEENSLAND taxation expert has questioned the Federal Government's decision to raise the retirement age to 70 while capping superannuation contributions.
BDO partner Mark Molesworth said a legislation change in this Federal Budget went some way to rewarding people who were planning for the future through contributions during their younger years.
But he questioned whether having a $180,000 non-concessional contribution cap would actually prevent some people avoiding an aged pension.
"It really does worry me that the government on one hand is increasing the aged pension age to 70 but is still trying to limit the amount of money that people can put into superannuation when they're younger and earning and can actually afford to do so," he said at a BDO post-budget breakfast in Brisbane.
"That to me seems to be one of the biggest issues which is ripe for reform in the system
"That's going to be a very difficult political discussion for any government to have but it is a discussion that needs to be had if the government is serious about encouraging people to save for their own retirement and not letting them live on the aged pension."
Mr Molesworth - whose company is the fifth largest full-service audit, tax and advisory firm in the world - said excess non-deductible contributions from an earner, rather than compulsory employer funds, were currently taxed at the highest marginal rate.
He said that cap was there because the superannuation withdrawal system was now "so generous" after age 60.
"So those after-tax dollars suddenly become pre-tax dollars again and get slugged with, at the moment 46.5% tax, rising to 49% tax from the July 1," he said.
"The government, to manage its loss of revenue from those withdrawals being tax-free, limits how much money can go into superannuation.
"So the non-concessional contribution cap is there to stop people putting too much money into superannuation.
"People have been finding they have been inadvertently going over those caps and that's been unfair.
"The government has listened.
"The change to the legislation is that if you go over your non-concessional contributions cap, you will be able to withdraw the excess contribution plus any earnings on that contribution while it's been in the fund.
"You'll be taxed on the earnings at your marginal tax rate when you withdraw it but you won't be taxed on the withdrawal amount."
Former Federal Forde and State Moggil MP David Watson said global demographic studies showed there would be more people in the world over age 65 by 2050 then there would be people aged under 16.
He said the Federal Government needed to have a look at its tax structure as a whole because the current system would not work in 2050.