Indigenous people will retire with 23% less income than non-Indigenous Australians, according to new research by Griffith Centre for Personal Finance and Superannuation.
Recent proposed changes to Australia’s superannuation regime – from freedom of choice for default funds, to lifting the contributions rate from 9% to 12%, to reforming who pays how much tax, all make a great deal of sense. But they also fail to address a more fundamental problem which is the moral hazard implicit within the existing superannuation investment model.
It’s no secret that our superannuation system is unfair. Over half the value of the tax breaks goes to the top 20% of income earners, people who already have enough resources to fund their own retirement.
The taxation of superannuation has been the cause of much consternation. Much of the difficulty is the result of the slow drift of superannuation from the moorings of its original purpose.
Australia is engaged in an ongoing debate about the fairness of the superannuation system. Those on the highest incomes are seen as extracting the greatest and an unfair advantage from tax benefits currently available. This problem of perception is inevitable in a system where contributions are made out of our pre-tax income.
Submissions to the government’s taxation white paper show support for reducing concessions for superannuation but with no clear agreement on how to do this, according to a Treasury analysis.
Allowing first homebuyers to cash out their super to buy a home is a seductive idea with a long history. Like the nine-headed Hydra, which replaced each severed head with two more, each time the idea is cut down it seems to return even stronger.
Debate swirls around the strengths and weaknesses of Australia’s superannuation system. But there is one aspect where change should not be countenanced: its compulsory nature.