As a superannuation auditor with decades of experience, I am passionate about maintaining the integrity of Australia’s superannuation system and ensuring it continues to benefit all people for generations to come, which is why I believe it’s essential that the Federal Government not go ahead with the proposed changes to superannuation, announced in February.
The proposal strikes a dagger into the very heart of the Australian superannuation system and undermines the notion that you can put long-term plans in place to benefit your retirement.
The millions of Australians who have played by the current superannuation rules and been encouraged by various contribution measures to boost their super balance during their working lives are now finding that the goal posts have shifted.
I would argue that within the next four decades, having a retirement nest egg of more than $3 million will be considered ‘modest’ given the current rise in our cost of living, and more people will easily breach this hard cap.
The Government’s suggestion that the proposed changes will only impact around 80,000 people is wrong, as it will ultimately impact many more people in future years.
The introduction of a hard cap also undermines current contribution schemes, including the small business 15-year exemption, the small business retirement exemption and downsizer contributions, all of which encourage people nearing retirement to invest more into their superannuation and become self-sufficient.
Indexation isn’t the answer and I strongly urge the Government not to go ahead with the changes at all.
Of added concern is the plan to tax unrealised capital gains, which, if implemented goes against the very principles of investment and the current tax legislation on capital gains. It also impacts the most basic taxation principle of all – Fairness.
Currently, there is not a single investment product or structure in Australia where unrealised gains are taxed – including family trusts or corporate entities – so should Australians be concerned that this measure could also be implemented on unrealised gains outside of superannuation?
I believe this change will result in the sale of assets and the withdrawal of funds from superannuation accounts, as people are forced to pay tax on profits they have not yet seen – and may not ever.
I appreciate the Federal Government has difficult decisions to make as it looks to make budget savings, but there are other options available which are less detrimental to the well-being of future generations.
The Government should instead consider raising the GST, a simple measure which would positively impact the current fiscal deficit, and can be very effectively communicated to the Australian public.
Simply ‘taxing the rich’ is a tired political cliché and in this instance it’s also wrong.
Division 293 already taxes people with incomes over $250,000 an additional 15% on superannuation contributions, with a further minimum 15% tax paid to the Government when these people die, and the death benefits are paid to their estate or non-dependents.
If the Government goes ahead with the proposed measures, I have no doubt there will be a paradigm shift, where the Government of the day will end up collecting less in taxes and force more people to rely on the Aged Pension in their later years.
A more prudent measure would be to minimise Australia’s future liability towards an aging population, rather than a goal of balancing the present-day fiscal deficit.
I believe that it’s in the long-term interests of all Australians to contribute as much as they can into their superannuation. The current proposal doesn’t encourage this and is unfortunately a disincentive to save.
Our superannuation system needs stability, and a moratorium on change, so that people can make long-term plans for a self-sufficient retirement.
We have one of the most admired superannuation systems in the world, and it’s imperative it be kept that way.
Let people take care of their money, and their money take care of them.