COTA Australia welcomes the opportunity to provide comment on draft legislation to implement the higher concessional superannuation contributions cap that was announced on 5 April 2013.
COTA Australia (COTA) is the national policy arm of the eight State and Territory COTAs. Around Australia COTAs have over 1,000 member organisations with a combined membership in excess of 500,000, in addition to a combined individual membership of around 40,000 older people.
COTA welcomed the announcement by the Government that it was going to increase the cap for people over 60 years to $35,000 in 2013‐14 and for people over 50 from 2014‐15. We are pleased that the draft legislation has come forward so promptly. We had argued for the proposed higher cap of $50,000 pa and would still prefer to see this as the amount, but support the $35,000.
We support the indexation of the general concessional cap so that it retains its value as income increases over time and as the compulsory contributions rise over time from 9 to 12 per cent. This will certainly provide an incentive for people to contribute more than just the compulsory amount.
However we do not support the proposition that the higher concessional cap is temporary and would be removed once the general cap reaches $35,000, estimated to be in 2018. The rational for having a higher cap is to encourage people to improve their retirement savings at a time in their lives when they are more able to do so through making higher voluntary contributions.
There will still be people in 2018 that have not received superannuation contributions throughout all of their working life and are still struggling to regain the ground they lost as a result of the global financial crisis. The need for such an incentive does not disappear with increases in the general cap.