The SMSF Association says CEDA’s contribution to the retirement income system debate “misses the mark” in two important respects – recommending first home buyers have access to their super and for all super contributions to come from after-tax income.
Association CEO/Managing Director Andrea Slattery says all contributions to this important policy debate are welcome, but we have “strong concerns” with some of the recommendations in CEDA’s paper.
“Allowing first home buyers to access their super to fund their first home purchase, while well meaning, fundamentally undermines the core objective of the super system – to provide income in retirement.
“We recognise the importance of secure housing in retirement, but the Association strongly believes that super savings should be retained for the sole purpose of providing retirement income, and housing policy challenges should not be solved through the use of retirement savings.
“It is critically important to ensure that super balances early in a person’s life cycle are protected so they can benefit from compounding investment returns over time,” she says.
Slattery says CEDA’s recommendation for all super contributions to come from after-tax income to improve equity of the tax settings and to align them with that of owner-occupied housing also was cause for major concern.
“There are two key policy rationales for the concessional treatment of super contributions: to compensate people for having their income locked away in super for a long-term period and to encourage extra voluntary savings.
“The CEDA recommendation undermines both these important superannuation policy rationales.
“It should also be noted that earnings in super are taxed, unlike those from owner-occupied housing, which are generally tax-free.
“We believe that if any measure is introduced to improve the equity of superannuation, a light tax on benefits that are in excess of a generous tax-free threshold is the most simple and effective measure as detailed in the SMSF Association tax white paper submission,” she says.
Source: SMSF Association
