The Super objective and taxes
Cbus Chair and former Victorian Premier Steve Bracks recently called on the Federal Government to move as quickly as possible to increase the Superannuation Guarantee (SG) to 12% and to reinstate the Low Income Superannuation Contribution (LISC), funded b
There has been a lot of debate about Malcolm Turnbull’s tax policies, or lack of them at this stage, but one thing we do know is that tax on super is on the table.
The government is considering four options for reducing the current tax concessions that apply to superannuation. • Lower the income threshold to $180,000 (down from $300,000 now) where the contributions tax rises from 15 per cent to 30 per cent; • Limit annual concessionally capped contributions to
super to $20,000 (down from $30,000 at present • Halve the capital gains tax discount for super funds
(from 30 per cent to 15 per cent); • Abolish the transition to retirement strategy.
Many groups have weighed into the debate and it isn’t just tax that is facing change.
Following the Superannuation Legislation Amendment (Choice of Fund) Bill 2016 introduced into the House of Representatives by Assistant Treasurer Kelly O’Dwyer on 17 March 2016, AMMA executive director, policy and public affairs, Scott Barklamb weighed into the debate welcoming the proposed legislation to ensure unions cannot use enterprise agreements to stop Australian employees choosing which fund they want to direct their superannuation into.
“Unions regularly insist that enterprise bargaining agreements (EBAs) covering wages, leave and hours
also compel employers to direct all employee superannuation contributions into an industry superannuation fund nominated by the union,” Barklamb said.
“Employees covered by these enterprise agreements are denied superannuation choice. This means they cannot choose where to direct their retirement incomes, and are denied the full range of competing superannuation products. It also stops employees consolidating their superannuation into a single account to reduce fees.
“This includes employees who did not vote for the agreement and are not members of the union.
“This is unacceptable. Union bosses, enjoying the support of just 11% of private sector employees, should not be able to decide where the superannuation of working Australians is directed and remove their right of choice – particularly not to force contributions into funds with union officials sitting on the board.”
But back to the issue of tax, Terry McCrann wrote in his Herald Sun column on 20 March that superannuation is too tempting for Malcolm Turnbull and Treasurer Scott Morrison.
Here’s an extract from McCrann’s column: “The government has abandoned the idea of increasing the GST and switched instead to targeting superannuation.
“We will find out in the May Budget precisely who it is going to tax and how.
“Increasing the GST from 10 to 15 per cent would have tapped the pot called ‘consumption spending’.
“Every year consumers spend around $1 trillion. After excluding those things that are not taxed, like fresh food and health, the existing 10 per cent GST adds around $55 billion to the cost and takes that extra money to Canberra.
“The superannuation pot is nearly double that, at around $2 trillion, and of course growing every year, thanks to the mandatory inflows and, hopefully, investment returns.”
Meanwhile, Mr Bracks was responding to both the consultation paper released by Kelly O’Dwyer into establishing a legislated objective for Superannuation and reports the Federal Government is considering increasing taxes on superannuation as part of the 2016 Federal Budget.
“Cbus supports a single objective, not just for the superannuation system but the whole of retirement policy that moves beyond budget and electoral cycle tinkering and kite-flying.
“Cbus will be making a submission to the Government which will argue that the objective should be “To deliver a comfortable retirement to all Australians”.
“The objective measure for this could draw from the well-established Australian Superannuation Funds Association (ASFA) comfortable retirement income standard.
“The ASFA standard is to reach savings on retirement of $640,000 for a couple and for a single person of $545,000.[
“At the moment less than 6% of Cbus members aged 60 or over have reached this standard. Based on retirement income estimates, we project less than 20% of all of our members will reach this standard when they retire.[
“This makes the decision by the Government to push back the move to a 12% SG to 2025 short-sighted. It is also likely to increase pressure on the Federal Government’s budget as retirees will need to rely even more heavily on the Age Pension.
“Similarly the decision to remove the LISC for low income workers will put a comfortable retirement further from reach, especially for women. This important contribution should be reinstated in the 2016 Federal Budget.
“The Government should also put more resources into ensuring compliance with the current SG legislation. Non-compliance to SG is estimated to be as high as $2.6 billion a year. The effect of non-payment on workers retirement can be dramatic with Tria Investments estimating that an average 25 year old impacted by non-compliance for 5 years loses 14% of their retirement savings.
“These measures should be funded through a redirection of superannuation tax concessions that are currently skewed towards the wealthiest Australians.
“To reach the objective of our superannuation and retirement system, government policy and concessions in superannuation should be targeted to benefit low and middle income earners who continue to struggle to reach a comfortable retirement income.”
Mr Bracks said the first priority for any increased revenue from superannuation taxes should go to improving the superannuation of low to middle income earners.
“Extra revenue from tax increases on superannuation should be used to restore the Low Income Superannuation Contribution before any cuts to personal income taxes are considered. This would improve retirement incomes and reduce pressure on the Federal Budget, especially given Australia’s ageing population,” Mr Bracks said.
Established in 1984, Cbus is the industry superannuation fund for the construction, building and allied industries. Cbus recently received recognition for its 10 years as a platinum rated fund by independent ratings agency SuperRatings. Cbus is run only to benefit members, and doesn’t pay commissions to sales agents or financial advisers.
The lump sums required for a comfortable retirement assume that the retiree/s will draw down all their capital and receive a part Age Pension.
Based on ASIC RIE Guidance, estimates as at 2015, assuming 50% of ASFA couples figure
“INCREASING THE GST FROM 10 TO 15 PER CENT WOULD HAVE TAPPED THE POT CALLED ‘CONSUMPTION SPENDING’