The Financial Planning Association (FPA) has warned the Federal Government that its Tax Laws Amendment Bill runs the risk of discouraging a savings culture and removes incentives for key groups of Australians to be independent in their retirement.
The warning is contained in an FPA submission to the Senate Standing Committee on Economics and describes the legislation as “a retrograde step and one that will have far bigger budgetary implications in the future”.
It said with life expectancy rates continuing to increase and the rising cost of living, retirement incomes would need to sustain people for longer periods.
“When considering existing levels of saving for retirement, it is clear that current levels are inadequate for a significant proportion of the population,” the submission said.
It said the budget measure to reduce the superannuation co-contribution significantly reduced the incentive to save for lower income earners.
“The FPA requests that the co-contribution not be reduced,” the submission said. “However, if it must be reduced, in an attempt to consider the long-term national interests, the reduction should be in place for no more than one year and then reinstated.”
Dealing with the proposed concessional cap reduction, the submission said the reductions clearly resulted in reduced preparation for retirement and undermined the three pillar system.
“Of particular concern to financial planners and their clients are the changes to the concessional contributions cap without a phasing in period, which leaves financial planners only a few weeks to reshape strategies for a large portion of their client base,” it said.
