Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 131

How safe is my super from rule changes?

"How safe is my super from changes to the regulations? What do you think the government has in store for us?" The person who asked me these questions is an executive in his early 50s who is busily trying to get his finances in shape to retire at age 65.

For a person of his age I am not overly concerned. There have been non-stop changes to the superannuation system since it became universal more than 25 years ago, but there has been no element of retrospectivity. Yes, there are many voices now saying the system is too generous, but they tend to be focusing on those few people who have more than $5 million in super, and who are certainly not representative of the majority.

So what can we expect? The government has promised no changes in their present term but this has only a year to run at most. Opposition Leader Shorten has already announced Labor’s intention to increase the contribution tax to 30% for people whose adjusted taxable incomes are in excess of $250,000 a year. This is not a huge leap from the present system where the 30% tax applies to people with incomes of over $300,000.

Under the present system, there is a 15% tax on earnings from superannuation funds in accumulation phase but this reduces to zero once the fund enters pension mode. Under the Gillard government there was a proposal to tax the income of a pension fund once fund income exceeded $100,000 a year per member. This was a fairly mild proposal because the 15% tax was only on the excess income over $100,000. But the predictable outcry ensued, and the proposal did not become law.

It is now Labor policy to reintroduce this tax but they have made it tougher – it will apply once income exceeds $75,000 a year. Given the failure of the last attempt, the chances of this getting through must be considered slim, but even if it did, it’s probable only a few would be affected.

Think about a couple with $4 million in super, with a portfolio that is spread in a conventional manner between cash 30%, local shares 35%, international shares 25%, and listed property 10%. The income including franking credits would be around $73,000 each, which would still keep it under the threshold for Labor’s new tax. I suspect when they start doing the numbers, they may come to the conclusion that the gain is not going to be worth the pain.

The Association of Superannuation Funds of Australia (ASFA) proposes that money in pension phase be capped at $2.5 million per member. It might be easy in theory but devilishly difficult in practice. Is the intention to take the balance at June 30 and simply switch the excess, if any, to accumulation mode? If the market has a sudden fall or rise, or if there is a big withdrawal, do you have to go through the whole process again? But once again we’re talking about balances of $5 million and over, which is hardly likely to worry mums and dads.

Emails arrive continually from people who are concerned that the government will change the rules to prevent withdrawal of lump sums. I do think at some stage in the future the government of the day might decide to compel retirees to take part of their superannuation as an income stream, but that may be a long way off. It would be a brave government who would compel retirees to lock up part of their retirement funds in an annuity when interest rates are at historic lows.

Yes, more change is inevitable. In my view, the biggest risk for most retirees is an overemphasis on cash in their portfolio because they are averse to risk. Many retirees can now expect to live 25 years or more after they retire. For them, holding money in cash may be one of the riskiest strategies of all.


Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. See

geoff godden
September 09, 2016

are politicians exempt from these s/f changes and if not why not ????.

October 29, 2015

100% Warren. Many, many people out there have this interpretation that superannuation is a "product" as opposed to a tax environment (with accessibility restrictions). I am always telling my clients that they can invest in effectively the same assets inside super as they are able to outside and they look at me stunned.

It's much the same as them thinking it is the fund administrator that determines the returns they receive as they do not understand the difference between who administers the super fund and how their money is actually invested.

Also on Ken's point, I'm curious to know as well. I remember the Government at the time stating that the tax on pension earnings over $100,000 pa would only affect about 16,000 Australians with $2 million or more in their pension (Shorten loves to pander to the people doesn't he?).

This was all well and good if the fund only earned 5% per year, but in the particular year he said it many funds earned 20%, meaning anyone with only $500,000 in a pension, quite a lot more than the 16,000 "super rich" he was referring to, would be taxed.

Warren Bird
October 28, 2015

I agree with Noel's point about excessive cash holdings being the biggest risk for many superfund investors.

But, I've also met a lot of folk over the years who have put less into super than they could have - and possibly should have - because of fear that it will "just lose me money when the market crashes". When I've pointed out that you can invest all your super in cash if you want they have looked at me incredulously, because no adviser has ever told them that. Also, all the news reports on balanced super funds and their returns have created the impression with some people that it is super itself that is the volatile asset class.

I don't know that this misunderstanding is widespread, but it's happened enough in my conversations that I feel it's worth mentioning. Advisers need to accept that some people just want to know their money is "safe". Many think that means keeping it in a term deposit rather than putting it into that risky thing called super.

So you need to get them first of all in to a cash option in super, so they get all the after-tax benefits of doing that. Then when they understand super, you can start talking to them about the benefits of risk and diversification.

It would also help if the news reports of super fund returns would quote growth funds, balanced funds and cash fund returns to help people realise that there are choices with super.

October 23, 2015

I found Noel Whittaker’s article very encouraging. I have read other articles on the same subject which I found confusing especially in the use of words like taxing the “income” of the fund in pension mode.

Would you have Noel confirm that we are talking about “earnings” and provide his assumed earning rates for each of the asset classes he uses in the example so that I can make my own estimates for my fund.
Also would he comment on whether capital gains (realised or unrealised) are included or how they are treated.


Leave a Comment:



Superannuation needs greater outcomes focus

Deriving an effective retirement income

Super performance test will destroy viability of some funds


Most viewed in recent weeks

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Latest Updates


Stop treating the family home as a retirement sacred cow

The way home ownership relates to retirement income is rated a 'D', as in Distortion, Decumulation and Denial. For many, their home is their largest asset but it's least likely to be used for retirement income.


Hey boomer, first home buyers and all the fuss

What is APRA worried about? Most mortgagees can easily absorb increases in interest rates without posing a systemic threat to the banking system. Housing lending is a relatively risk-free activity for banks.


Residential Property Survey Q3 2021

Housing market sentiment has eased from record highs and confidence has ticked down as house price rises slow. Construction costs overtook lack of development sites as the biggest impediment for new housing.

Investment strategies

Personal finance is 80% personal and 20% finance

Understanding your own biases and behaviours is even more important than learning about markets. Overcome four major cognitive biases that may be sabotaging your investing and recognise them in others.

Where do stockmarket returns come from over time?

Cash flow statements differ from income statements and balance sheets, and every company must balance payments to investors versus investing into the business. Cash flows drive the value of the business.

Fixed interest

How to invest in the ‘reopening of Australia’ in bonds

As Sydney and Melbourne emerge from lockdown, there are some reopening trades in the Australian credit market which 'sophisticated' investors should consider as part of their fixed income portfolios.


10 trends reshaping the future of emerging markets

Demand for air travel, China’s growing middle-class population, Brazil’s digital payments take-up, Indian IPOs, and increased urbanisation are just some of the trends being seen in emerging economies.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.