The Association of Superannuation Funds of Australia (ASFA) has reinforced its support for the scrapping of the 15 per cent superannuation contributions tax, raised by Finance Minister Nick Minchin last week, with statistics showing all Australians would benefit if the tax were to be abolished.
In particular the figures showed middle income earners, on salaries of between $45,000 and $60,000 per annum, could improve their lump sum superannuation benefits by any amount between $29,600 and $39,400 over a 30-year time line if the contributions tax was removed.
Gains for this salary band were more modest, but still significant, over the shorter term with lump sum benefits increasing by between $3,300 and $4,400 over five years, and between $7,000 and $9,400 over 10 years.
The projections were expressed in present day dollars under the assumption that the compulsory superannuation guarantee would stay at a level of 9 per cent.
“Removing the super contributions tax makes eminent sense from both a public policy and individual point of view: individuals would see their balances grow faster, able to face retirement with more confidence; the nation would benefit from the increased pool of domestic savings and funds available for investment; and future governments would have a lighter burden of under-funded aged people,” ASFA chief executive Philippa Smith said.
Axa Asia Pacific Holdings group chief executive Les Owens also weighed-in to the debate saying the proposal to eliminate the contributions tax was a step in the right direction and his organisation would support any initiatives that would encourage greater retirement savings.
Owens likened superannuation contributions to deferred current consumption, as it is classified in the UK, and argued that a tax should not be levied on funds which people were not able to spend today.
However he believes most people should receive an income during their retirement years rather than a lump sum payment, and said if that were the case it would be reasonable for the government to tax the income as earned income in retirement.
