A group of the Federal Government’s own backbenchers is urging it to cut taxes on superannuation, with some calling for even more radical changes, such as allowing younger people to raid retirement savings to pay for housing deposits.
And the Financial Planning Association (FPA) has also weighed into the debate, calling for a tax deduction on financial planning advice to encourage people to seek professional help on super.
Liberal Senators John Watson, Judith Adams and Gary Humphries have all separately written to a Parliamentary inquiry, urging the Government to reform the superannuation tax system.
Adams, from Western Australia, said the Government’s current super tax regime was a “serious disincentive”, and urged it to do away with taxes at the superannuation contributions stage and when people took out their benefits.
She also called on the Government to consider giving individuals a “superannuation tax holiday”, allowing people to “nominate one financial year when all super contributions … would be tax-free”.
In his submission, ACT Senator Gary Humphries said the Government needed to consider “increasing taxation concessions for superannuation contributions”.
If this didn’t work, then people on “reasonable incomes” who did not make voluntary superannuation contributions could be hit with a surcharge, similar to the 1 per cent Medicare Levy.
Humphries also backed proposals to allow people to access their super early to pay for housing.
“If they were able to use, for example, 20 per cent of every dollar voluntarily contributed for a housing deposit, greater investment [in superannuation] may occur,” Humphries said in his submission.
A former chair of the Senate’s superannuation committee, Watson, from Tasmania, was also critical of the current super tax regime.
He told Money Management that the Australian system suffers from high taxation, being the only one in the world to tax super savings at three stages — contributions, earnings and benefits.
Watson said one solution would be to boost tax deductions for individuals who make personal super contributions.
“If there is one area that is lacking at the moment it is Commonwealth support for personal contributions,” he said.
But Watson was not holding his breath for reform, saying it “probably won’t happen overnight”.
In its submission to the Parliamentary inquiry, the FPA said tax deductions on financial planning advice would encourage more people to seek help on their finances, which would raise the level of retirement savings.
FPA manager of policy and government relations John Anning said: “Just the same as advice on tax is deductible, so should financial planning advice be [deductable].”
