TheAssociation of Super Funds of Australia(ASFA) and theInvestment and Financial Services Association(IFSA) have called on the Government to pour some of its $7.5 billion surplus into tax reductions on superannuation contributions, rather than personal tax cuts.
According to IFSA chief executive Richard Gilbert and his counterpart at ASFA, Philippa Smith, this would alleviate the looming problems associated with the ageing population and savings shortfall.
“There is a consensus that superannuation contributions in Australia are taxed too highly and at too many points. Also, all sides of politics acknowledge that Australians do not save anywhere near enough for their retirement and reducing taxes on superannuation contributions would tackle both these issues,” Gilbert says.
“The Government has been using superannuation contributions as an advance revenue stream for today’s needs, but it is very detrimental for the incentive to save and has really clipped the retirement savings people can hope to achieve,” Smith says.
“The tax on super contributions is a ‘show stopper’ when it comes to discouraging savings for retirement and seriously erodes the efforts of individuals to achieve a modest retirement income,” Smith says.
Smith says ASFA recommends the abolition of the 15 per cent superannuation surcharge, the cost of which would be $2.4 billion, or equivalent to a $4-5 per week income tax cut for individuals on average weekly earnings.
“With the Government there has been a tacit agreement that removing the surcharge would be a desirable outcome, but they always said they couldn’t afford it – now they clearly can afford it,” Smith says.
Research commissioned recently by IFSA identified a $600 billion savings gap between what Australians expect to have in retirement and what they will actually have.
Reducing the superannuation contribution surcharge was one of the recommendations of IFSA’s major policy statement released in August,Retirement Incomes and Long Term Savings – Living Well in an Ageing Society.
ASFA research has also revealed that although $30,000 per annum is the minimum retirement income needed by most Australians, current savings fall far short of this target.
