Former Keating adviser defends super tax concessions
The Federal Treasury and other critics of the tax-preferred status of superannuation are being misleading about the real cost to Government revenue of providing superannuation tax concessions, according to former Keating adviser and Federal department head, Don Russell.
Addressing a Super Review Post-Retirement and Ageing Forum in Sydney, Russell said it was misleading to discuss the tax concessions in terms of revenue foregone because, in the absence of tax preferment, the superannuation guarantee (SG) might cease to exist at all.
He said the Treasury numbers were based on the assumption that compulsion and the superannuation guarantee would survive the removal of tax concessions, and he did not believe this would be the case.
"The community won't agree to lock up 9 to 12 per cent of their income each year for 30-40 years and have the Government determine how they get it back without tax preference," Russell said. "People have deferred current consumption for a better retirement."
The former Keating adviser also pointed to the fact that despite the age of Australia's superannuation guarantee regime, superannuation balances remained comparatively low and that this, when combined with longevity, was serving to maintain pressure on the age pension regime.
He said this gave rise to two problems: how to help people with resources manage the risk, and how to help the vast bulk of the community who lack resources.
"The whole of life annuity market is deeply flawed," Russell said, arguing that a low-cost option might be for the Government to issue 30-year self-amortising indexed bonds.
Among the other options canvassed by Russell were to provide extra resources by skewing the superannuation guarantee and pension to provide benefits later in life.
He said there could be a tranche of the SG that became available at 75 that sat on top of the 12 per cent, or the Government might look to pay a higher pension at age 85.
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