Ever since the federal government dropped its super bombshell on 3 May 2016, superannuants and their advisers have been in a state of flux as to what the final changes might be and the strategies needed to deal with the new rules.
Ostensibly we were told the changes proposed were necessary to make the retirement savings system sustainable for the future.
This was the justification for the introduction of drastic measures such as the lifetime non-concessional contributions cap of $500,000 and reducing the concessional contributions cap to $25,000 a year across the board.
But so as not to make it all seem like a doomsday scenario, there were a few sweeteners in there such as the scrapping of the work test and the 10 per cent rule.
As is often the case with contentious legislation, a process of negotiation took place before the final bills were passed, leaving us saddled with the continuation of the work test rule and a yearly non-concessional cap of $100,000, as long as your superannuation balance does not exceed $1.6 million.
Most of the shock over the changes related to the 180-degree departure from the traditional stand previous coalition governments have taken regarding retirement savings, that being higher contribution limits and greater incentives for individuals to save and self-fund their own retirement.
Perhaps the Turnbull government now thinks it’s achieved something in terms of sustainability and this framework is one that wouldn’t necessarily be tinkered with the next time Labor wins office, seeing as the philosophy toward superannuation for the two major parties has now somewhat aligned.
If this is the government’s sentiment, it should think again as to what has really been achieved. Much of what’s been done to the system in 2016 can be and has been seen as lowering the bar – certainly when it comes to how much money you can potentially save for retirement now.
But here’s the thing: if the bar has been deliberately lowered, it has already been made obvious a Labor government will lower it even more. The evidence? The minute the new legislation was passed in November, opposition treasury spokesman Chris Bowen announced the opposition would have made the non-concessional contributions cap $75,000 a year.
Couple this with its opposition to the scrapping of the work test rule and it is clear the government has paved the way for a race to the bottom as far as superannuation policy in the immediate future goes.
The problem is, how will we know when the bottom has been reached?
Darin Tyson-Chan, editor of selfmanagedsuper.
