In my opinion, the changes to superannuation are a backward step that will reduce the ability of the population to save for retirement. Following are the changes the government decided upon:
- A reduction in the concessional superannuation contribution cap to $25,000 for all Australians from 01/07/2017. If you are over 50, the current cap is $35,000 and if you are under 50 the current cap is $30,000.
- A reduction in the amount of non-concessional super contributions an Australian can make from $180,000 per year to a $500,000 lifetime limit. This includes contributions made since 01/07/2007.
- Tax free earnings in retirement will be limited to balances up to $1.6million.
- Increased tax on concessional contributions for high income earners has been lowered to $250,000 from $300,000.
Adequate concessional superannuation concessional contribution caps are vital to allow people to save for a secured retirement. The government will argue that $1.6million is more than an adequate nest-egg. This may be true, but the tax savings along the way to individuals will reduced as well, so the government is getting two bites of the cherry.
Targeting superannuation in such a manner will affect current retirees as well as individuals preparing for retirement. It is paramount, that pre-retirees maximise contributions before 30 June 2017. Now is the time to put a retirement strategy in place.