Changes to tax treatment of superannuation must consider objectives of the system: ASFA

The Association of Superannuation Funds of Australia (ASFA) has urged the government to maintain a broad and holistic view of the superannuation and retirement incomes system when considering changes to tax concessions.

“Newspoll findings released today in The Australian show the extent to which Australians are engaged in conversation about the future of superannuation,” said Pauline Vamos, CEO, ASFA.

“This discussion in turn has reiterated the need for the government and stakeholders to agree the objectives of the superannuation system. Such discussion should be had in a holistic manner rather than isolating specific tax levers.

“There are certainly opportunities to look at the level of tax in the superannuation system and it is vital to consider three objectives when doing so: equity, sustainability and the delivery of adequate incomes throughout retirement. ASFA has already made suggestions in this regard and will constructively engage in any public debate on options canvassed by the government in its tax consultation process. Reducing the threshold for a higher rate of tax on contributions to $180,000 in income a year could well be an option that the government is considering.

“However, any changes need to be carefully considered in the context of the overall retirement system. People’s incomes change over their lifetime—a level of income today may not necessarily be an accurate indicator of retirement savings—and we need to ensure that people have the ability to save for a comfortable retirement. The impact of any tax change on future expenditure on the Age Pension also needs to be taken into account.

“ASFA’s preference is to encourage people to save as much as possible for their retirement up to a certain account balance threshold and then reduce tax concessions after that.”

ASFA has previously suggested that the ceiling whereat the superannuation system should stop providing taxpayer support for accumulating retirement savings is an account balance of $2.5 million. ASFA has also consistently advocated for the retention of the Low Income Superannuation Contribution (LISC) scheme to improve the equity of the system.