John Roskam’s opinion piece, ‘Keeping to the law is fair in tax’, which featured in the Australian Financial Review on 17 April 2015, included a number of inaccuracies.
Mr Roskam stated that the Association of Superannuation Funds Australia (ASFA) paper on very high superannuation account balances was “targeting superannuation accounts with over $1 million”. This is not correct. ASFA’s research, released earlier this month, which is based on Australian Bureau of Statistics data, shows that there are 70,000 people with very high balances - this is above $2.5 million.
ASFA has advocated since its 2013/14 pre-Budget submission that changes to superannuation, particularly in post-retirement, should begin with balances above $2.5 million. At no time has ASFA advocated for changes to superannuation for accounts below $2.5 million.
In developing the basis for this number, ASFA considered the following: a replacement rate in retirement that is often used is 60 per cent of gross pre-retirement incomes and, for a person on $200,000 a year, a reasonable upper limit for the provision of taxation concessions or other assistance, a drawdown of $120,000 is required in retirement. This is close to twice the ASFA Retirement Standard estimate for the income required for a ‘comfortable’ retirement. Using the minimum drawdown factor for a person aged 65 to 74, this would require a superannuation balance of $2.4 million. Accordingly, ASFA’s view is that account balances in excess of $2.5 million are where a line should be drawn.
ASFA also thinks very high superannuation balances should not be targeted exclusively in the absence of a broader consideration of the superannuation and taxation system. The tax issues paper is the correct place for this to be considered as part of a holistic review of the tax system and ASFA will be advocating for its position in its submission.
ASFA’s members include all superannuation providers from all sectors. It advocates for public policy that puts fund members and the sustainability of the retirement incomes system at its centre. It has robust policy development processes at an operational and governance level that insure all sectors’ views are heard but ultimately good public policy is policy that is bi-partisan, longer term and insures sustainability, equity and effectiveness.