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Make contribution caps flexible
A carry forward approach for concessional contribution cap amounts is more equitable and sustainable than lifetime contribution caps, the SMSF Association believes.
The association urged the Government to end the "use it or lose it" approach and allow people to make increased contributions to superannuation when their circumstances allow it.
SMSF Association chief executive, Andrea Slattery, said "a lifetime contribution cap model can be exploited by making large concessional contributions early in life, reaping the long-term benefits from the low-tax superannuation environment for related investment earnings".
"But under a carry forward model, contributions are limited by the maximum annual concessional contribution cap," she said.
"Ultimately, making the contribution caps more flexible will ensure that everyone saving for retirement will have ample opportunity to make contributions to superannuation to build adequate savings that can be drawn down later in life."
Slattery said the current system delivers a poor result for people with volatile incomes.
"Those with broken work patterns, especially women, small business owners or farmers whose income can fluctuate widely. These people may be able to make significant contributions to superannuation in some years but not others," Slattery said.
"In addition, younger people who are unable to make contributions above compulsory superannuation contributions earlier in life due to financial commitments, such as mortgages and raising families, will have an opportunity to increase their contributions later in life.
"At the end of the day, ensuring that we have flexible contribution settings that cater for modern work patterns and people working longer will ensure the superannuation system can deliver the best results for all Australians."
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Great article and I agree in theory with it, but it'd be laborious from an administrative perspective both for monitoring it and reporting it to the ATO.