Australia’s peak industry body for the superannuation industry, theAssociation of Superannuation Funds of Australia(ASFA), has warned the Government that any increased spending on defence in the upcoming budget should not come at the expense of Australia’s future retirees.
The association issued the warning in a pre-budget submission today, where it also called for a cap to be put on the Government’s “increasing tax take” from superannuation savings.
The ASFA submission says war with Iraq appears imminent, but that “a substantial ‘greying army’ of baby boomers who are advancing steadily towards retirement will mount a battle of a different kind against any government it perceives as not having shared the task of ensuring an adequate standard of living once their working lives are over”.
The chief executive of ASFA, Philippa Smith, says the Government has become dependent on revenue from taxing superannuation to the long term detriment of retirees’ savings.
She says the current 15 per cent tax on superannuation contributions should be progressively reduced by 1.5 per cent each year from 2004 onwards to boost superannuation savings.
But if the proposal is not adopted, she says the Government should take the more conservative option of capping its tax take from superannuation to the level collected in the current financial year. The aim would then be for the rate of tax on contributions to be adjusted downwards over time as the level of superannuation contributions rises.
“In an environment of volatile investment returns and uncertainty, people are more conscious of what is happening to super contributions made on their behalf – our research has shown that they are more aware than ever of the taxation on super contributions,” Smith says.
“ASFA is conscious that Governments have become dependent on the advance revenue stream provided by the taxes on super contributions and investment earnings. But this is short term thinking and needs to be unravelled.”
The ASFA submission has also labelled the Government’s inability to breach a Senate deadlock in order to meet its election commitments to reduce the rate of the superannuation surcharge and introduce Government funded superannuation co-contributions for low income earners as a failure.
Smith says the Government should compromise by extending the co-contribution to middle, as well as low income earners, in order to break the current impasse in the Senate.
She says the Government should also reduce the super surcharge by 5 per cent over three years, as opposed to its current proposal to reduce it by 10 per cent over three years.
“The government has been unable to deliver on its election commitments to assist low income earners through a super co-contributions scheme and to start to reduce the surcharge on super, due to a deadlock in the Senate,” Smith says.
“However, this could also be interpreted as a failure by government to provide the necessary confidence and support for individuals saving for their retirement.”
