The ongoing controversy around the taxation of Australia’s superannuation system is undermining public confidence in the system, with suggestions that it needs a large overhaul being counter-productive, says SMSF Association CEO/Managing Director Andrea Slattery.
“In the current debate about how superannuation should be taxed, it’s important to remind ourselves that the overall system is working reasonably well and achieving its primary goal as it matures – helping people to build retirement savings to become more self-sufficient in retirement to reduce reliance on the age pension. [It is estimated superannuation is reducing the Government’s expenditure on the age pension by $7 billion a year.]
“Compulsory superannuation helps working Australians save for retirement. Voluntary contributions are supported by tax incentives to encourage people to sacrifice their income today for savings that can be used in retirement.
“At the same time the system is growing Australian retirement savings, with the recent “Deloitte Dynamics of the Australian Superannuation System” report showing a healthy system that is estimated to have $9.5 trillion in FUM by 2035.”
The Australian superannuation system was recently ranked third best in the world according to the Mercer Global Pension
index (http://www.globalpensionindex.com/wp-content/uploads/Melbourne-Mercer- Global-Pension-Index-2015-Report-Web.pdf )
“While the SMSF Association is not saying the current shape of our superannuation system is perfect, it is important that we have an orderly process in making any changes to the system.
“The Government’s Tax White Paper process is the right way to address whether any changes to superannuation tax are required and that debate should be had in a measured fashion. The current ongoing speculation about what changes may be made to superannuation is hurting people’s confidence in the system.”
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Slattery says the Association is hearing unfortunate stories of consumers who do not want to commit their savings to superannuation due to the constant threat of legislative change.
“While we are always open to a discussion about how the superannuation system works, it is important not to lose sight of the fact of what has been achieved to date to assist people build an adequate amount to be self-sufficient in retirement.
“In addition, it is essential that there is bipartisan support for the objectives of the superannuation system so savers can be reassured about the long-term stability of the system.
“It’s also important that the Government commits to a rethink about how to cost superannuation tax incentives. We believe it is almost impossible to have a sensible policy discussion when we do not have a clear picture on how the superannuation tax incentives benefit Government over the long term.
“It’s long been the Association’s opinion that how super tax incentives are measured, combined with the lack of a consistent objective, distorts the public discussion about superannuation, and that if these issues are resolved then a lot of heat would go out of this public debate.”