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Retirement incomes policy debate roars on
It’s easy to miss the wood from the trees in the mish mash of arguments back and forth about a range of views on what our super system should look like. But in the current melee, the importance of last year’s Retirement Income Review is not being missed.
ASFA took the opportunity to publicly release this year’s Budget submission at its annual conference last week (February 10-12), with the Retirement Income Review (RIR) findings a focus, and this week’s SMSF Association National Conference (February 16-18) is having a keynote session chaired by Deborah Ralston, one of the three committee members of last year’s Review.
Martin Fahy, ASFA chief executive, said: “Superannuation is about ensuring people have adequate income in retirement, it is not about facilitating excessive wealth transfers.”
While the RIR found Australia’s retirement income system is effective, it made a number of observations about the fairness of current tax concessions for superannuation and the amount of support provided to higher-income earners.
And while the superannuation system is well-designed and working for the majority of Australians, ASFA acknowledges that there is merit in addressing concerns about fairness in the system, the association says.
“In this context, recent changes to tax rates have created an unintended distortion where low-income earners between $37,000 and $45,000 pay a similar tax rate on superannuation contributions to the marginal tax they pay on wages. ASFA recommends that the low-income superannuation tax offset should apply to individuals with taxable income of up to $45,000.”
However, ASFA acknowledges that there is a fiscal impact from this crucial change and there are equity grounds for adjusting settings applicable to those with higher incomes and/or high account balances.
“In this regard, ASFA considers that equity across the system can be improved through a modest reduction in the Division 293 threshold from $250,000, removing indexation of the transfer balance cap and removing balances above $5 million from the concessionally taxed superannuation system,” ASFA said in a release at the conference.
For the SMSFA conference – both are being held virtually – John Maroney, that association’s chief executive, said: “We are extremely lucky to have one of the RIR panel members, Dr Deborah Ralston, address the issues raised by this important report, as well as having input from Peter Burgess, the association’s deputy chief executive and director of policy and education, Robin Bowerman, Vanguard’s head of corporate affairs, and Jeremy Cooper, Challenger’s chairman of retirement income.
All four had a wealth of knowledge and experience about Australia’s retirement income system, Maroney said. “It will be invaluable for conference delegates to hear insights into their thinking on a report that will have an ongoing influence of Australia’s retirement income system.”
Meanwhile, ASFA’s pre-budget submission also looks to help improve retirement for people working in the gig economy and in other circumstances where they are missing out on super.
ASFA’s pre-budget submission also focuses on: the need for a new ‘dependent contractor’ category for the Superannuation Guarantee (SG); tougher sham contracting penalties; SG for the self-employed; and elimination of the $450 threshold for entitlement to the SG.
Fahy said: “In addition, technology is changing and with single-touch payroll, we are well placed to modernise the system and allow super to be paid at the same time as wages. This initiative would make the system more efficient and protect people’s savings.”
With these sorts of arguments still raging, who would have thought that Australia’s modern super system turns 35 this year? That is, it’s 35 years since the introduction of Award Super in 1986, which started it all, pre-dating the Superannuation Guarantee Charge legislation in 1992.
