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.
All Australians should be able to retire with dignity and decent living standards.
So states the recently released superannuation report of the Committee for Economic Development of Australia (CEDA).
The latest Productivity Commission report, Superannuation for Post-Retirement, highlights two aspects of post-retirement income policy that have recently attracted considerable attention: the age at which people should be able to access their superannuation, and whether lump sum withdrawals should be restricted.
Few people are likely to be interested in buying an expensive financial product which offers little return, particularly when that return is based on their life expectancy. But annuities, which provide a series of regular payments until the death of the annuitant in return for a lump sum investment, deserve closer attention.
In the six months since the Financial System Inquiry found Australia’s A$16 billion superannuation industry needed to improve efficiency, there’s been little willingness by the sector to admit to it.
Some industry leaders continue to argue that funds compete vigorously, so the outcome must be close to efficient, with little more than a few loose ends to be tied up.