Government tinkers with superannuation at the cost of consumers
Following last night’s budget announcement, the Financial Planning Association (FPA) has announced concern that superannuation is being used again as a political tool for government at the cost of consumers.
The budget announced that the start date of the higher concessional contributions cap measure will be deferred by two years, from 1 July 2012 to 1 July 2014. The two year deferral means that Australians will only be able to make concessional contributions of up to $25,000 per year. The original proposal would have allowed individuals aged 50 and over, with an account balance less than $500,000, to contribute up to $50,000 in concessional contributions.
Dante DeGori, General Manager of Policy and Government Relations said that “The deferral of the higher concessional contributions cap is a huge disadvantage to Australians over 50 who are trying to save for retirement. The FPA feels that this announcement is counter-productive to the Governments retirement policy objectives and counter-productive to the growth of the superannuation system and current savings culture in Australia. We do not support the $500,000 account balance eligibility threshold for concessional contributions and believe it should be scrapped altogether.”
The government also announced that from 1 July 2012, the tax for individuals with income greater than $300,000 will double from 15 per cent to 30 per cent on their superannuation contributions excluding the Medicare levy.
“The introduction of a quasi-surcharge on high income earners further complicates and acts as a disincentive for Australians saving for retirement with superannuation – this is not the message we what to send to the public. The introduction of a new surcharge style arrangement for high income earners is taking a step backwards – it did not work the last time and created inefficiencies in the superannuation system. We can’t see from this announcement how the administration of this measure will be any different,” DeGori says.
The budget announced a rise in fees for Australian Financial Services Licence (AFSL) holders to increase from $351 to $549 for a body corporate and from $144 to $225 for an individual.
“These increased costs cause concerns for many businesses that are already under increasing cost pressure due to the implementation of FoFA and other legislative changes. The FoFA reforms were meant to provide greater accessibility to more affordable advice for all Australians, however when costs to advisers and licensees increase, so too does the administration work around the provision of advice. Such a move was counter to reducing the cost of advice and a backwards step.
“We are calling on the government to look at measures to better support the low to middle income earners, which will allow them to better benefit from the superannuation system by providing concessions and incentives to save for their own retirement. The measures in this budget do nothing in supporting low to middle income earners to better plan for their retirement and reduce the future burden on government budgets, rather it creates further uncertainty around the retirement and savings for many Australians,” DeGori says.
ASIC will receive $180.2 million over four years, of which $23.9 million will be to facilitate the implementation and enforcement of the Future of Financial Advice reforms. The FPA has welcomed this funding and is looking forward to continuing working with ASIC on discussions around the Code approval process and the formulation of the regulatory guidance material to assisting financial planners comply with FoFA.