A little super peace

Thank goodness that superannuation has been left almost untouched in this week's federal budget.

After the monumental revamping of the super system from July 2007 - spearheaded by tax-free super lump sums and pensions for those over 60, plus simpler pensions - it is time to catch a little breath. I imagine most fund members would agree with my sentiment.

Interestingly, the influential Association of Superannuation Funds of Australia (ASFA) applauds the budget from a superannuation perspective for its "relative stability for superannuation fund members". This is despite having none of association's pre-budget wish list granted.

In its budget response, ASFA makes the crucial observation that retirees require stability about the taxation of their super benefits in order to plan with confidence for retirement.

ASFA's pre-budget wish list had included introducing a so-called "soft option" where 1% of employees' salary increases are contributed to super, within a cap - unless an employee opts out; and requiring employers to provide salary-sacrifice arrangements for super if required by employees.

The recommendation on salary-sacrifice upon demand is an excellent illustration of how the super system should be fine-tuned or tweaked in future to make it more equitable and to increase much-needed retirement savings. No doubt, ASFA will pull its recommendations out again next year for its 2009-10 pre-budget submission.

The perplexing inequity that some employees are locked out of the opportunity to maximise their super savings in a tax-effective way through salary-sacrificed super contributions should be urgently addressed - without waiting for the next budget.

I expect that among biggest developments in super over the next 12 months or so will have nothing to do with federal budgets.

It will involve an increasing determination by the tax office, as regulator of self-managed super, to pursue funds that are failing to comply with superannuation law. And in coming months, the ATO will heavily focus on trying to improve the poor knowledge among a minority of fund trustees about the most fundamental rules of super.