80,000 now, but how many if $3m super cap not indexed?

Mike Taylor

Managing Editor and Publisher

6 March 2023

Plato Investment Management managing director, Don Hamon has joined the chorus of investment voices pointing to the Government’s failure to signal indexation of its proposed $3 million superannuation cap.

According to Hamon the absence of indexing represents “an enormous flaw’ in the Government’s proposal while calling for some Treasury forecasting around how many people may eventually be impacted.

“It is perplexing the Treasurer has indicated this cap will not be indexed over time,” Hamon said.

“Currently the move is expected to impact 80,000 people, or just 0.5% of super accounts with balances of over $3 million in today’s money, however we have inflation currently running at 7.8% which will erode the real value of the $3 million cap over time.

“This means a lot more than 0.5% of superannuation balances will eventually be taxed at 30%,” he said.

“How many people in the superannuation system today will be impacted by this cap at some time in their superannuation journey?

“You only need to do some basic math – if inflation ran at 4% per annum for the next 30 years, and remember inflation is currently 7.8%, a $3m cap would be equivalent to just $925,000 in today’s dollars.

“Inflation will mean that many, many more individuals will be hit by this cap in the future if it is not indexed to inflation. I think voters need to know how many people will be impacted in say 30 years’ time, not just how many are impacted now.

“The other big question for the majority of retirees and even those nearing retirement is – what other changes is this Government likely to make next?”