The controversial cap on self-education expenses has been deferred, but the threshold below which inactive super accounts are transferred to the ATO will increase, as part of measures announced by the Treasurer last week.
Newly-installed Treasurer, Chris Bowen, and Minister for Finance and Deregulation, Senator Penny Wong, released an Economic Statement last week, detailing the short and medium term economic outlook for Australia.
The Statement contained measures designed to help steer the budget back to surplus. Among them was an increase to the level below which inactive superannuation accounts are required to be transferred to the Australian Taxation Office (ATO), raising the balance threshold up to $6,000 by 2016. The Treasurer also announced the $2,000 cap on the tax deductibility of self-education expenses would be deferred to 1 July 2015.
“The Government is adopting a fiscal position in the short term that supports jobs and is implementing new policy priorities to lift productivity, economic growth and Australian living standards,” Mr Bowen said.
Extension of Transfer Threshold for Inactive Super Accounts
The threshold below which small, inactive superannuation accounts, including inactive accounts of uncontactable members, are required to be transferred to the ATO will be increased to protect the real value of more lost superannuation accounts. The threshold will increase from $2,000 to $4,000 from 31 December 2015, and then to $6,000 from 31 December 2016.
The Government said the measure was estimated to have a net positive impact on the budget in underlying cash balance terms of $582 million over the forward estimates.
Governments should be consolidating peoples’ superannuation, not putting it into consolidated revenue
An increase to the threshold was first announced in April 2013, by then Minister for Financial Services and Superannuation, Bill Shorten, who advised that the threshold would increase to $2,500 by the end of 2015, and $3,000 by 2016 (see: Super Reforms May Put Aussies’ Insurance at Risk)
At the time, industry stakeholders raised concerns that the changes could inadvertently impact those members who have a low balance in a fund in order to retain their insurance cover.
Responding to the latest threshold increase, Financial Services Council (FSC) CEO, John Brogden, said the measures was unfair, and out of step with recent reforms to superannuation.
“We oppose this measure. Governments should be consolidating peoples’ superannuation, not putting it into consolidated revenue,” he said.
“It will unfairly capture the savings of many young and low incomes in particular,” Mr Brogden added.
Self-Education Tax Cap Deferred
The Government has decided to defer the introduction of the $2,000 cap on work related education expense deductions until 1 July 2015.
The Treasurer said the deferral would allow for further consultation on how best to target excessive claims, while ensuring the impact on university enrolments and genuine continuing professional development is minimised.
The cap was publicly opposed by numerous professional associations, who joined forces in a campaign to lobby for its removal (see: Professional Associations Call for Self-Education Cap to be Dumped).
Deferment still means that bad policy is being considered
While the ‘Scrap the Cap Alliance’ welcomed the announcement, saying it would enable proper, informed discussion that should lead to the eventual scrapping of the measure, the Institute of Public Accountants (IPA) said a delay was not a solution.
“Deferment still means that bad policy is being considered,” said IPA CEO, Andrew Conway.
“While further consultation time is welcomed, there is an evident need to reassure Australians partaking in ongoing education and skills maintenance.”
“We are calling on the Government to provide certainty instead of this nonsensical policy that reinforces a goal of mediocrity at a time when Australia’s competitiveness needs to be strengthened,” he said.
