![Wealthy retirees will take a modest hit under new super rules Photo: Sheridan Randall Wealthy retirees will take a modest hit under new super rules Photo: Sheridan Randall](/images/transform/v1/crop/frm/silverstone-feed-data/d9fc4d90-01f2-49e1-b9f5-889e707c2a01.jpg/r0_0_729_410_w1200_h678_fmax.jpg)
The Turnbull government's plans to rein in the super tax breaks going to the well-off are modest and fair. In fact, they probably should go further.
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The tax breaks on super are provided to encourage people to save for their retirement and make them less likely to fall back on the age pension.
But taxpayer subsidises are being wasted on those who are never going to end up on the age pension anyway.
In fact, in the case of rich retirees, taxpayers are subsidising their umpteenth overseas holiday and the size of the estate that will be passed on to their children.
The centrepiece reform announced in the May budget was a limit of $1.6 million to how much can be held in super in retirement.
Earnings on savings above that would be taxed at 15 per cent, the same rate paid by those still working.
However, the proposal generating the most heat is the one to limit the maximum amount of non-concessional contributions over a lifetime to $500,000.
These are the contributions that are made to super of money on which taxes have already been paid.
At the moment, up to $180,000 a year of contributions can be made.
That was always too generous and helps explain why there are thousands of self-managed super funds with more than $5 million in them.
Under the Coalition's proposal, the lifetime cap of $500,000 would be effective from budget night on May 3.
Anyone who had made non-concessional contributions totalling $500,000 between July 1, 2007, and the night of the budget night would have used their lifetime cap.
But if they had already exceeded the non-concessional contributions in excess of $500,000 as of budget night, they would be allowed to retain it in super.
Most people are never going get anywhere near the proposed $500,000 lifetime cap, let alone the existing $180,000-a-year cap.
The measure certainly does unsettle the plans of some people fortunate enough to be able make large after-tax contributions to their super, but so what?
They'll still be able to save money outside the super system.
Remember, the $500,000 lifetime cap is per individual, which means a couple would have a lifetime cap between them of $1 million.
Nevertheless, it does look like the Coalition's leadership will buckle under pressure from the party room on the issue.
The proposed $500,000 lifetime cap could even be increased, perhaps to $750,000.
It's in the interests of everyone for these modest reforms to become law and to stop super from being a political football. Well-off retirees are still on to a good thing.
Twitter: @jcollett_money