Making superannuation more sustainable

Getting the settings right now will set us up for the future and ensure we will maintain our world class superannuation system

As Australia’s population ages it is becoming increasingly important to ensure that the superannuation system is based on a clear objective, is providing the right incentives to save, and is flexible enough to ensure all Australians are given the opportunity to enjoy a secure retirement.

A clear objective for superannuation

The Government will, for the first time, enshrine in law that the objective for superannuation is to provide income in retirement to substitute or supplement the Age Pension, as recommended by the Financial System Inquiry. This objective has been an important anchor for the development of the superannuation reforms.

Targeted saving incentives

The Government will better target superannuation tax concessions to those who need them most and where they will be most effective in increasing self-sufficiency in retirement. Low income earners will be supported by the Low Income Superannuation Tax Offset, while limits will be placed on the amount of taxpayer support for tax-free retirement accounts.

96 per cent of individuals with superannuation will not be adversely affected by these changes.

These reforms include:

• the introduction of a $1.6 million transfer balance cap on the amount that can be transferred to tax-free retirement phase accounts;
• a 30 per cent tax on concessional contributions for those earning over $250,000 per annum;
• a lower $25,000 annual concessional contributions cap; and
• the introduction of a $500,000 lifetime non-concessional cap.

This will put the system on a more sustainable footing and increase confidence that superannuation settings are consistent with the objective.

Individuals will not be adversely affected by the changes unless they:

Greater flexibility

Recognising that individuals have different work patterns and employment arrangements, the Government will enable greater flexibility and choice in how we save for retirement.

For those who want to boost their superannuation balances, unused concessional caps will be allowed to be carried forward by individuals with superannuation balances of $500,000 or less, to enable ‘catch up’ superannuation contributions. The Government will also allow all Australians under the age of 75 to claim a tax deduction for personal contributions to an eligible superannuation fund, up to the concessional cap, and extend the eligibility for individuals to claim a tax offset for contributions made to their low income spouses’ superannuation.

Encouraging saving

The superannuation system is for all Australians and all Australians should be supported to use it where they can to save for their retirement.

The Government will lift restrictions on contributions to superannuation that apply to Australians aged 65 to 74 and instead apply the same contribution acceptance rules for all individuals up to age 75.

The Government will also assist those with small account balances that risk being slowly diminished by superannuation fund fees and charges. Impediments will be removed to allow eligible rollover funds to proactively reunite amounts they hold with active accounts of the fund member. This adds to other measures, like myGov, SuperMatch2 and pre-filled superannuation choice forms, which will help reduce the number of multiple accounts that erode retirement savings.