Federal election 2016: call for super amnesty for low-end savers

KPMG has called for an amnesty for people with low super balances, to build savings before the clampdown on contributions.

KPMG superannuation director, Ross Stephens.

Accounting giant KPMG has called for an amnesty period to allow people with low super balances to catch-up and build a reasonable amount of savings before the government clamps down with its tax cap on contributions.

The Turnbull Government’s “retrospective” changes to super rules have come under widespread criticism from self funded retirees, fund managers and Labor.

The government in the budget reduced the limit on voluntary contributions to $25,000 a year with a lifetime cap of $500,000.

Australia’s retirement savings industry has seen enormous growth over 20 years, reaching more than $2 trillion in funds under management last year. But growth looks likely to slow dramatically.

KPMG superannuation director Ross Stephens said for people in the later parts of their careers who hadn’t built up much super, the $500,000 cap and the $25,000 annual limit meant the system “will not enable them to build anything like the $1.6 million (limit on tax free pension accounts)”.

Mr Stephens noted many self-employed people, and those with lower incomes or ability to contribute were likely affected by the changes.

Self-managed super funds that had contracted to acquire a property before the Budget was handed down on May 3, could also be caught out, Mr Stephens said. Many would now suffer a “significant penalty tax” to make that contribution.

And those who sold a property ahead of Budget night may now have to invest the proceeds outside super. Mr Stephens noted people might not have chosen to sell properties had they been aware of the new limit.

Regardless of which side won the election, he said the next government would need to urgently consult the superannuation industry about the many problems found in the proposed changes to the retirement savings system.

Mr Stephens gave the incoming government a deadline of October to clarify issues surrounding the changes. That would allow the industry time to implement the reforms before the start of the 2017 financial year.

“It’s like trying to turn around an ocean liner,” Mr Stephens told The Australian.

“Some of the industry funds are gigantic beasts with millions of members. If you’re trying to capture and report member information to the ATO, that detail needs to be fleshed out soon.”

Mr Stephens said the current government’s other superannuation reforms, including reducing the concessionally-taxed income threshold from $300,000 to $250,000, would likely increase already sky-high administrative fees for account holders.

“Whenever there’s a change, any cost has to be recovered in fees which are imposed on members,” Mr Stephens said. “When the industry has to put new administrative systems in place, there is only one way costs can be absorbed and that’s through member fees. There’s no other pot here.”

The reduction in the concessional contributions threshold to $250,000 would roughly double the number of Australians affected by the upper limit to about 1 per cent of the working population, Mr Stephens said, resulting in an increased administrative burden for the superannuation industry.