The wealthy elite of the Australian Public Service will keep nearly all their generous superannuation concessions under the Coalition's long-awaited changes to super rules for high earners.
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The decision to keep exemptions for high-flying bureaucrats will result in a "double standard" in the new rules, according to one the nation's leading expert on public sector superannuations.
The Coalition is moving to cap the amount that of "non-concessional" or after-tax top-ups to super funds at $100,000 a year, down from the previous $180,000.
The new rules, agreed between the Coalition and Labor after the Liberals' original plan ran into trouble with conservatives in the government party room, are supposed to deliver more fairness and trim the big concessions available to wealthy Australians who stash large sums of money in their super.
But financial advisor Daryl Dixon, whose firm has advised thousands of public servants on their retirement plans, says the changes revealed in draft legislation published last week leaves generous concessions for high-earning members of the public service "defined benefits" super funds almost intact.
Under the new rules, most workers receiving employer contributions of more than $25,000 per year will be hit with a penalty tax on the money, but those rules have not been brought into line with the public sector's defined benefits schemes.
High-ranking public servants not only enjoy employer contributions of 15.4 per cent on their salaries, but they are nearly all in the coveted defined benefits schemes which have been closed to new members for more than 10 years.
The only loss this group faces, under Treasurer Scott Morrison's draft legislation, is the ability to make tax-free contributions to a second super fund.
Mr Dixon said the Treasurer's original plan, to impose a backdated $500,000 lifetime cap on non-concessional contributions would have hit wealthy defined benefits scheme members hard, forcing many of them to make large withdrawals from their super accounts when they hit retirement age.
But under the plan Mr Morrison will take to Parliament, there are no upper limits for contributions for the defined benefits scheme members, unlike most workers who will be hit with a $25,000 annual cap.
"This continues the current huge advantage available only to higher-income defined benefit fund members whose annual super entitlements can exceed six figure amounts," Mr Dixon said.
The advisor says the government has merely tinkered around the edges of provisions that preserve the defined benefits arrangements from 2007.
"Surprisingly also given the large sums of money involved, the changes do not alter the grandfathering provisions applying to funded defined benefit fund members employed before 2007," he said.
"The beneficiaries are higher-income mainly Reserve Bank, university and large corporation employees receiving annual employer contributions well in excess of the $25,000 cap.
"This is in stark contrast to the harsh treatment of accumulation fund members receiving much less generous employer superannuation benefits who face normal income tax rates on all employer contributions in excess of the $25,000 cap.
"Not only will defined benefit fund members continue to receive large employer contributions, but these contributions will continue to be concessionally taxed and exempt from the penalty tax provisions."
