The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Generation Life general manager, Felipe Araujo, said that further reforms to superannuation could be on the cards as the government looks to minimise the use of superannuation as a bequest vehicle.
While the Albanese government has struggled to pass its Division 296 tax changes, Araujo said it is still likely there will be further changes down the line, depending on the outcome of the election.
Araujo noted that Australia is currently facing a problem where a substantial portion of retirees are living frugally with the fear that they will spend all of their hard-earned assets and are then passing away with large superannuation balances.
“So, they’re not spending enough money in the early days of retirement because they’re worried they won’t have enough money to see them through retirement but unfortunately they’re then passing away with a large asset base inside their superannuation,” he said.
Araujo said the government has already previously raised its concerns about superannuation being used as a wealth transfer tool rather than for retirement income.
“We’ve already seen Minister for Financial Services Stephen Jones be very vocal around his intention for more Australians to use more of their superannuation assets. He has also mentioned that superannuation should not be used as a bequest vehicle.”
Minister Jones stated previously that he found it odd that in a system designed for retirement income, a third of cheques being written by superannuation funds, by value, were bequests.
“It’s not the purpose of superannuation to have a tax-preferred, state planning mechanism. It’s for providing for people in their retirement,” Jones told ABC News Breakfast last year.
While the government has signalled that it wants to address this issue, Araujo said it’s not clear exactly what that would look like from a tax policy perspective.
Araujo said the legislation of the objective of superannuation, which was passed in the final sitting this year, has also helped set the foundations for making further changes to super.
The objective for superannuation is focused on creating equity and sustainability within the superannuation system.
The outcome for Division 296, which will see additional tax applied to earnings on balances above $3 million, also continues to remain highly uncertain, Araujo said, and the outcome of the new super tax will depend on when the election is called.
“One camp is saying there will be an election called in late January and if that occurs, then Division 293 will be taken to an election. There’s also a camp suggesting that the government will try and implement further bills in a February sitting and call a slightly later election for May.”
