The need for better transitionary arrangements for some people who had aimed to retire within the next few years represents the main adverse reaction to the sweeping changes to superannuation brought down in last week’s Federal Budget.

Despite early debate as to whether the abolition of the complex Retirement Benefit Limits (RBLs) would significantly reduce the level of business for financial planners – following comments to that effect by the Treasurer, Peter Costello – the consensus which emerged in the first week of feedback, including that of the Financial Planning Association, was that planners still had plenty of other things to do. While some groups expressed disappointment that the Government did not abolish or reduce the 15 per cent contributions tax, there was generally strong support for the proposed changes. The Opposition, however, said it would wait for final costings before deciding on whether or not to support the changes. Among the changes, a new cap of $50,000 for undeducted (pre-tax) contributions and $150,000 for deducted (after-tax) contributions, per year, would apply from next year. The undeducted limit is about half that of the previous limit for people approaching retirement, on a sliding scale according to age. The concern is that some near retirees may have been waiting for the next couple of years to put larger lump sums into their super. The Government has embarked on a series of meetings with industry representatives, which will include the main superannuation bodies and financial planners and early indications are the Government is prepared to negotiate on the transition arrangements. Peter Dutton, the Assistant Treasurer and Minister for Revenue, was quoted in yesterday’s Australian Financial review as saying: “I think the transitional arrangements are obviously the biggest issue for us to deal with and, obviously, what we don’t want to do is not take into account people’s exceptional circumstances. We want to take those into account as best we can so they are not disadvantaged …” Another concern is the increase in the tax rate, from 30 per cent to the new top marginal rate of 45 per cent, for amounts above $140,000 taken as termination payments. The Government said it would look at submissions from interested parties on the eligible termination payments changes.

Leave a comment