Blog

The treasurer has opened the door for changes to Australia’s superannuation tax concessions, arguing there needs to be more of a focus on the long-term sustainability of the scheme.

Jim Chalmers said Australia was on track to spend more on super tax concessions than the age pension by 2050, adding he was “not convinced that’s a sustainable way to get to our destination”.

“While our immediate focus is consulting on the objective of super, that can’t be the end of the conversation about super’s sustainable future,” he told a gathering of super and pension fund managers in Sydney.

In the question and answer segment that followed, Chalmers again raised the sustainability of the tax concessions, which allow people to contribute up to $25,000 annually at a reduced concessional tax rate of 15%.

“I think it is important that we recognise if our big task is to make superannuation sustainable, then this kind of conversation shouldn’t be off the table,” he said.

“Our priority on super is getting the objective locked down and dealing with some of these other issues. But it shouldn’t prevent a group like this and the nation beyond thinking about and talking about the sustainability of the system more broadly.”

Chalmers opened the conversation ahead of the publication of the latest tax expenditure statement, which is due to be published before the end of the month.

The Association of Superannuation Funds of Australia (ASFA) asked the government to consider bringing in a $5m cap on tax concessions on super in its pre-budget submission.

“One of the concerns in relation to the sustainability of tax concessions within superannuation is the tax concession enjoyed in relation to investment earnings for high-balance members,” the group submitted to the government, while making the point there were at least 11,000 superannuation fund members who had more than $5m in their retirement accounts.

ASFA would like to see concessional tax changes for those making smaller contributions to make super more equitable. The retirement review, handed down in 2020, found financial inequality continued into retirement, with people who did not own their own home more likely to financially struggle.

Chalmers said his main focus was defining what superannuation was for, proposing laws to enshrine a new definition that stated “the objective of super is to preserve savings to deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.

That has earned general support from the sector, given it would mean ending early withdrawals in all but the most serious hardship cases.

Industry Super Australia said “preservation is critical to securing a better standard of living in retirement for more Australians – busting open super early dramatically erodes savings and harms quality of life in retirement”.

Its chief executive, Bernie Dean, said: “It’s a good proposal because it safeguards the future of working people and reflects what they already understand as super’s purpose: savings solely for their retirement.

“It should help avoid another disaster of allowing people to tap into super early for any reason, which hurts everyone.”

The shadow assistant treasurer, Stuart Robert, was an early detractor of Chalmers’ announcement, saying early access to superannuation was about providing dignity.

“What can be more dignified than Australians getting early access to super because they’re 26 weeks unemployed and they’ve got a family?” he said.

“What can be more dignified than Australians getting early access to super for their medical needs, or frankly, for the last two years of their life?

“We do want to talk about dignity. But we want to talk about the dignity of the individual, not the dignity of the government and what the government wants to do.”

Article Credited to Amy Remeikis @ The Guardian

We would also greatly appreciate your support by following us on Facebook, Linkedin, Instagram-Oracle and Instagram-Kountable for more great tips, support and the latest tax news and headlines!

Oracle Accounting & Wealth is located at Suite 31, 89-97 Jones Street ULTIMO NSW 2007. Phone: 02-9715 2977

Liability limited by a Scheme approved under Professional Standards Legislation.

Disclaimer

The information in this newsletter / factsheet is factual but general in nature. It should not and is not to be construed as advice at any level whatsoever. Because it contains general information that has not been tailored to your personal circumstances it may not be suitable information for you. You must always seek personal financial or taxation advice prior to acting on this information. Further, as many of the comments in this newsletter / factsheet are general in nature, anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.