Liberal members of the parliament are reporting widespread disquiet about Prime Minister Malcolm Turnbull’s decision to tax transition to retirement payments for people over 55 years of age. These changes in superannuation were announced by the government during May’s Budget, raising $3.2 billion over four years.
Though they claim that they can live with the $1.6 million cap on tax-free superannuation accounts, many of them are not happy about the $500,000 cap on non-concessional superannuation contributions, saying that the government has underestimated the number of retirees affected.
According to one Liberal MP, “People are on average accepting of the $1.6 million cap because they acknowledge super was never intended to be a tax minimisation or real estate planning tool. But what they are upset about is the $500,000 cap, because over their lives they have a number of priorities—educating their children, paying off the mortgage, and then building a superannuation nest egg. If we have got a cap, I don’t see why the government should be concerned how people reach it.”
New rules state that earnings generated by transition retirement pensions will be taxed at 15 per cent instead of being tax-free. This would stop the rich from using transition retirement pensions for tax minimisation.
The government has maintained that roughly 115,000 people will be affected by these changes. However, superannuation groups argue that more than 550,000 Australians aged 56 to 65 will be affected, based on Australian Prudential Regulation Authority figures.
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