The Federal Government has been warned against further tightening of either the asset or income test in this year's Federal Budget on the basis that they would simply leave many Australians in retirement worse off.
The Association of Superannuation Funds of Australia (ASFA) has used its pre-Budget submission to the Treasury to argue that the Government's 2016 Budget changes to superannuation have delivered what was intended and now is the time for policy certainty and stability.
Predicting further pressure on the Government on the tax-advantaged status of superannuation, the ASFA submission pointed out there had already been "a substantial and positive impact from recent reforms, in terms of a reduction in government expenditures and increasing tax revenue".
“The Age Pension assets test changes that took effect from 1 January 2017 are helping contain future growth in Age Pension expenditures,” ASFA chief executive, Dr Martin Fahy said.
“Superannuation tax changes have substantially reduced the tax assistance flowing to upper income earners, plus the overall amount of tax concession for super contributions has been reduced by around $1.25 billion a year.”
“In addition, there is a further $1.1 billion a year in greater tax revenue in regard to superannuation investment earnings flowing from the cap on balances in pension phase and changes to the Transition to Retirement pension arrangements. These changes have impacted most on upper income earners," Fahy said.
The ASFA submission said the number of Age Pension recipients fell from 2,570,072 in December 2016 to 2,494,060 in March 2017, a fall of 3 per cent, while the number of full rate age pensioners rose marginally, from 1, 515,411 to 1,548,590, a rise of around two per cent.
"However, the total number of Age Pension recipients has continued to fall, with 2,489,591 in total in September 2017," the submission said.
"In ASFA’s view, the changes made to the Age Pension were substantial and appear to make the Age Pension fiscally sustainable for Australian governments in the years ahead, while not leaving the great bulk of retirees substantially worse off."
“This will be reinforced by rising superannuation account balances at retirement as the compulsory system matures,” Fahy said. "However, any further tightening of either the asset or income test could leave many Australians in retirement worse off."