The Association of Superannuation Funds of Australia (ASFA) Pre-Budget Submission released today focuses on the findings of the Retirement Income Review (RIR) on equity in the system.
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.
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.
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 as well. 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.
“Superannuation is about ensuring people have adequate income in retirement, it is not about facilitating excessive wealth transfers,” said ASFA CEO Dr Fahy.
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.
“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,” added Dr Fahy.
For further information, please contact:
Jacqui Maddock, 0451 949 300.
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.