Labor’s policies on super are controversial as they make further restrictions on the ability of taxpayers to contribute to super and build up their retirement balances. They take things a step further than the changes made by the Liberal Government in many areas.
Labor proposes to reduce the non-concessional cap down from $100,000 to $75,000 which impacts and reduces the three year bring forward cap down from $300,000 to $225,000. When we consider that several years ago the cap was $150,000 this is a 50% reduction.
They also propose to re-introduce the 10% rule to restrict personal contributions. This rule was only recently abolished by the Liberal Government. It broadly means that employees will again need to salary sacrifice through their employers any additional deductible contributions into super rather than being allowed to make a contribution personally at any time as long as they are under 65 or under 75 years of age and meet the work test (remunerated for working 40 hours in a 30 day period).
Finally, Labor proposes to ban borrowing involving self-managed super funds within SMSFs. Currently a fund is permitted to borrow if the borrowing is used to acquire an individual asset (such as a property) and this regulation has been used by many to increase their super funds by allowing them to invest in assets they previously could not afford with their super balances.
The only concession the other way for taxpayers is the proposal to increase the super guarantee over a shorter time period from 9.5% to 12%. This could have a hidden cost for employers or employees depending on their employment contracts. Those employees who are employed on a package including super will find their pay packets decreasing with further funds going into super while those employers with employees on a salary plus super will end up having to pay more for their employees.