Super in the News
There has been a lot of media debate in recent months about future superannuation and retirement incomes policy. There have been calls for all sorts of changes, including among others:
- reducing the tax concessions that apply to super
- requiring retirees to take at least part of their super as an income stream
- increasing the age at which you can access super
- allowing first home buyers to access their super as a deposit for a home loan.
Much of the debate has been generated by the release of the 2015 Intergenerational Report, a report produced by the Australian Government that assesses how changes to Australia’s population size and age profile may impact on economic growth, the workforce and public finances over the next 40 years.
Still more debate has been generated by the Government’s recent release of a tax discussion paper entitled ‘Re:think’. This paper is designed to start a debate about taxation reform in Australia and asks the question “how do we have a taxation system that copes and delivers for Australia’s future?”
Both documents highlight the pressures of Australia’s ageing population on public finances and Government spending.
The pressures of an ageing population
The Intergenerational Report projects that the number of Australians aged 65 and over will double by 2054/55 and that nearly 2 million Australians will be aged 85 and over in 2055. Male life expectancy is projected to be 95.1 years in 2055 with female life expectancy projected to be 96.6 years. As a result, many retirees will live 30 or more years in retirement.
The Intergenerational Report also highlights that as our population grows older, the proportion of the population participating in the workforce is expected to decline.
The ‘Re:think’ tax discussion paper points out that it is workers that pay the most personal income tax. As the number of workers falls dramatically compared with the number of retirees over the coming years, Australia’s reliance on personal income taxes to fund public services is likely to come under increasing pressure.
It is against this background that the ‘Re:think’ paper is seeking industry views on how to increase Government revenue in order to fund future public spending. One way according to a number of opinion leaders would be to remove, or reduce, the tax concessions that apply to super, at least for high income-earners or those with high super balances.
However, there remain sound policy reasons for the tax concessions that apply to super, not the least being that the tax concessions encourage people to provide for their own retirement, rather than calling on the Aged Pension. The Association of Superannuation Funds of Australia estimates that every dollar of super income saves the Government 50 cents in Aged Pension expenditure.
Keeping people working longer has also been suggested as a way of increasing Government revenue. The longer people work, the longer they pay personal income tax and the shorter time they have in retirement. This has led to media speculation that the age at which people can access their super will be increased, possibly in line with the current legislated increase in the Aged Pension eligibility age to 67.
There has also been speculation that changes will be made to how superannuation may be accessed on retirement. The 2014 Financial System Inquiry Report argued that super funds be required to provide an income product for retirement and that a mandated approach to take up of this product would provide members with better overall outcomes in retirement.
Act on what you know, not what might be
Remember that the suggested changes to superannuation policy being debated in the media are just speculation at this time. Be assured that SuperBPO constantly monitors the debate about possible future changes to superannuation policy. We keep our clients and their members informed of any changes to super policy as they happen. Contact us to find out more.
This article is not intended to be financial advice and is of a general nature only that does not take into account your individual objectives, financial situation or needs. While all efforts have been made to ensure the information contained in this article is accurate, errors may occur.