Sustainability of retirement incomes

The Government has decided to reform superannuation concessions to ensure spending is better targeted and fiscally responsible in the short and long term. These measures will save around $4.2 billion over four years.

From 1 July 2009, the Government will reduce the annual cap on concessional superannuation contributions from $50,000 to $25,000, and the transitional cap (which applies until 30 June 2012 for those aged 50 years and over) from $100,000 to $50,000.

Less than 2 per cent of people who make concessional contributions will be affected by this measure (regardless of their age). These caps will improve equity by reducing the disproportionate benefits received by higher income earners who can afford to make larger concessional contributions.

The Government will also temporarily reduce the superannuation co‑contribution matching rate from 150 per cent to 100 per cent for contributions made in 2009‑10, 2010‑11, and 2011‑12 (a maximum co-contribution of $1,000 will apply), and to 125 per cent for contributions made in 2012‑13 and 2013‑14 (a maximum co-contribution of $1,250 will apply). The reduced matching rate will still provide a very generous incentive for those who are eligible.