Tightening access for the pension will be up for discussion as part of a new push by the government to make superannuation fairer.Minister Bill Shorten has assembled 16 industry professionals and experts to advise him on “providing Australians with more options in retirement and improving certain superannuation concessions”.
The roundtable, to be chaired by Mr Shorten himself will toss around ideas rather than formally receive submissions or make recommendations. It is the approach the government took in deciding on the form of the carbon tax legislation.
“We have got to look at the ridiculous notion that super is there to take pressure off the age pension, said one of the members of the panel, Richard Denniss of the Australia Institute.
“Peter Costello and John Howard loosened the means test and the assets test for the pension very generously on their way out. People of substantial means are getting the part pension and getting access to up to $800 a year to help meet their utility bills.”
“I’ll be telling Mr Shorten he can’t look at the rules governing superannuation without also looking at the rules governing access to the pension."
Another panel member, Pauline Vamos of the Association of Superannuation Funds agreed.
“We have to look at it... The means test threshold has to move much higher,” she told the Herald. “Super was meant to be a replacement for the pension, not tacked on alongside it.”
Access to a part pension is at present available to couples earning up to $65,572 a year and single retirees earning up to $42,837 a year. The Industry Super Network's David Whiteley, who is also on the panel, said he expected it to examine Treasury modelling on the effect of access to the pension.
“Interaction with the pension has to be an element. I don’t have a firm view on where access should be cut, but it has to be an element.”
Dr Denniss said a recent letter to a financial advice column concerned the plight of an Australian in receipt of a full age pension plus income from a defined benefit super scheme who had paid off his house and owned four investment properties. “He wanted advice. I think that one letter spells out just about all that’s wrong with this ridiculous notion that super is there to take pressure off the aged pension system,” he said.
An even bigger problem was that contributions to super were taxed at 15 per cent, yielding almost no tax benefit for someone on the 15 per cent marginal rate, but a big benefit for someone on the 45 per cent marginal rate.
“They’ve taken some action. They are going to post people on the lowest tax rates a $500 cheque, but it is trivial compared to size of the tax concessions still offered to the rich, Dr Denniss said.
Ms Vamos cautioned against making further big changes to the superannuation tax rules.
“No system is going to be perfect. The changes people are talking about would really only tweak at the edges in terms of their effect, but would be very disruptive.”
Mr Shorten said it was important to examine the fairness of the system before the start of the phased increase in compulsory super contributions from 9 per cent to 12 per cent from July 2013 and July 2019.
Other questions to be considered by the roundtable would include the compliance cost of proposed changes to the concessional contributions cap and the availability of annuities as an alternative to lump sums.
All proposals would have to be funded by offsetting savings.
Published in today's SMH
THE HON WAYNE SWAN MP
Deputy Prime Minister
Treasurer
THE HON BILL SHORTEN MP
Minister for Employment and Workplace Relations
Minister for Financial Services and Superannuation
29 January 2012
SUPERANNUATION ROUNDTABLE
The Gillard Government is today pleased to announce a new Superannuation Roundtable to consider ideas raised at the Tax Forum for providing Australians with more options in retirement and improving certain superannuation concessions.
Our superannuation system is based on the foundation of compulsory savings, supported by concessional tax treatment, with the aim of ensuring that more Australians have adequate savings in retirement.
The Government is already implementing important reforms to make superannuation concessions fairer for low-income earners and improve the adequacy and equity of the retirement income system. These include increasing the superannuation guarantee, introducing the low income superannuation contribution, abolishing the age limit on the superannuation guarantee, and providing Australians with access to low-cost funds through MySuper.
At the recent Tax Forum there was further discussion about building on these reforms by giving retirees more options in the drawdown (or ‘post-retirement’) phase, and about better ways to target and more efficiently deliver current concessions.
The Superannuation Roundtable will progress these ideas by bringing together representatives of the superannuation industry, small business, employees and the community sector, as well as technical experts and academics.
The first stage of work for the Roundtable will discuss and examine better ways to target and deliver certain concessions. The Roundtable will need to consider offsetting savings from within the superannuation system for any proposals that have a budget cost.
As part of this initial work, the Roundtable will consider compliance cost issues raised by the superannuation industry in relation to the new higher concessional contributions cap for individuals aged 50 and over who have less than $500,000 in superannuation.
The Roundtable will subsequently examine proposals to expand options in the drawdown phase, like annuities and deferred annuities, as well as appropriate offsetting savings.
We expect this work to be completed by December 2012.
The Roundtable will be chaired by the Minister for Employment and Workplace Relations, Minister for Financial Services and Superannuation, the Hon. Bill Shorten MP.
The work of the Roundtable will build on the significant superannuation reforms announced by the Government as part of its Stronger, Fairer, Simpler package of tax reforms. These include:
· progressively increasing the superannuation guarantee rate from 9 per cent to 12 per cent from 1 July 2013 to 1 July 2019;
· introducing a new low income superannuation contribution worth up to $500 a year from 1 July 2012, which will effectively refund the 15 per cent contributions tax for individuals with income up to $37,000;
· introducing a $50,000 concessional contributions cap for individuals aged 50 and over who have less than $500,000 in superannuation from 1 July 2012, which is $25,000 more generous than the general cap of $25,000; and
· abolishing the 70 year age limit on the superannuation guarantee from 1 July 2013.
The Government’s reforms to boost retirement incomes are part of a broader suite of reforms to strengthen and broaden Australia’s economy. These include over 30 individual reforms originating from the Australia’s Future Tax System Review, including resource taxation reform making possible higher retirement savings for all Australian workers and tax relief for Australia’s 2.8 million small businesses.
Also arising from last year’s Tax Forum, the Government has established the Business Tax Working Group to look at how our tax system can best help businesses increase productivity and respond to the pressures of a changing economy.
The membership of the Superannuation Roundtable will be:
The Hon. Bill Shorten MP (Chair)
Minister for Employment and Workplace Relations
Minister for Financial Services and Superannuation
Hazel Bateman
School of Risk and Actuarial, University of New South Wales
John Brogden
Chief Executive Officer, Financial Services Council
Everald Compton
Chairman, Advisory Panel on the Economic Potential of Senior Australians
Richard Denniss
Executive Director, The Australia Institute
Paul Gerrans
Business School, University of Western Australia
Dr Cassandra Goldie
Chief Executive Officer, Australian Council of Social Service
Melinda Howes
Chief Executive Officer, Institute of Actuaries Australia
Ged Kearney
President, Australian Council of Trade Unions
Mark Rantall
Chief Executive Officer, Financial Planning Association of Australia
Fiona Reynolds
Chief Executive Officer, Australian Institute of Superannuation Trustees
Andrea Slattery
Chief Executive Officer, SMSF Professionals’ Association of Australia
Peter Strong
Executive Director, Council of Small Business of Australia
Pauline Vamos
Chief Executive, Association of Superannuation Funds of Australia
David Whitely
Chief Executive, Industry Super Network
Cate Wood
Australian Association of Women in Super
Representative of the Joint Accounting Bodies
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