Submission: superannuation reform package – tranche three

Thank you for the opportunity to make a submission in relation to the third tranche of superannuation reform package draft legislation. This submission will deal with two main issues: the insufficient time allowed for consultation and the overly complicated nature of the changes.

Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016

Insufficient time for consultation

More time should be allowed for consultation on the changes to the non-concessional contributions cap due to the recent announcement of the new measures, the substantial reduction in the contribution cap and the complicated nature of the changes – both separately and when combined with changes in the rest of the legislation.

I note that only one week has been allowed for public consultation on this draft legislation, which was released late on a Friday afternoon. This reflects poorly on the consideration given to public views on draft legislation and should be avoided in the future.

More time should be allowed for consultation on these measures, particularly given the substantial changes from what was announced in the 2016 Budget. Also, the new measures can have complex interactions with other changes, in particular the Transfer Balance Cap.

Whereas there has been many months of debate on the changes announced in the 2016 Budget, though not on the exact detail of the measures, the new non-concessional cap changes were only announced just over a month ago. They contain a substantial reduction in the non-concessional contributions cap, complicated changes to the bring-forward provisions and a new restriction on contributions – linking it to the Transfer Balance Cap threshold. More time should be allowed for consideration of such changes from a policy and legislative prospective.

I call on the Government to extend the amount of time allowed for consultation on the changes contained in this draft legislation before it is put before the Parliament

Changes are overly complicated

In my view the changes limiting non-concessional contributions based on a particular superannuation balance, initially $1.6 million, is overly complicated. This is especially the case for provisions dealing with people who are near the cap or have triggered the bring forward rules.

Some of this complication comes from the transition to the lower non-concessional cap for people who have already triggered the bring forward rules. I suggest that where the bring forward has already been triggered contributions should be allowed to continue as expected under the existing rules.

The rules, and resulting timing issues, where people are near or over the Transfer Balance Cap threshold are also complicated. The draft legislation proposes that non-concessional contributions be prohibited where superannuation balances are over the, initially, $1.6 million balance threshold. However there are timing issues in implementing this aspect of the measure. Super fund members, in particular SMSF members, may not be able to get accurate calculations of their superannuation balances until some time after the end of the financial year. This is particularly the case where information to calculate tax amounts are not available for several months after the end of the financial year. This issue was recognised in relation to the Transfer Balance Cap, to an extent, in the second tranche of draft legislation, with a 60 day period allowed to correct excesses. The Explanatory Materials to the draft Bill says:

The rationale for this relief is that it will be difficult for individuals with existing superannuation income streams to predict their retirement phase balances as at 30 June and ensure they are not in breach of their $1.6 million transfer balance cap. Small breaches of less than $100,000 are likely to be unintentional.

However no such provision is included for the non-concessional contributions cap.

The importance the new non-concessional cap rules place on accurate and timely superannuation balance figures can also be an issue for people considering using the bring forward provisions in the future. Small misestimations of balances, for instance between $1,399,999 and $1,400,001 can mean a $100,000 difference in the amount of non-concessional contributions that can be made in a single year.

If these complicated measures are to remain then I recommend that relief provisions be included in the legislation so that people aren’t penalised for inadvertently exceeding the new caps.