Superannuation policy needs to focus on demographics not balances

A more demographic-centred framework to superannuation policy is required rather than a "one size fits all" approach, according to the Institute of Public Accountants (IPA).

The IPA recommended in its recent pre-Budget submission that current superannuation policy should be based on three distinct demographics: the disengaged (those under 40 years of age); the partially engaged (those 40 to 50 years of age); and the fully engaged (those over 50 years of age).

IPA executive general manager Vicki Stylianou added that a demographics-based approach would provide more stability in better assessing tax concessions rather than focusing on superannuation balances, which "vary greatly for a lot of different reasons" throughout a person's life.

While the IPA stated that it supports the increase of the superannuation guarantee (SG) from 9 to 12 per cent, one of its recommendations was the introduction of a soft-compulsion system for persons under the age of 40.

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This would allow people on lower incomes to opt-out of the increase in the superannuation guarantee (SG) and maintain their level of income, particularly when buying a house or starting a family, the IPA said.

The Government needed to better incentivise this demographic to make extra contributions either through tax incentives or by better educating them to view super as a long-term asset of its own, Stylianou said.

The IPA also proposed that the annual concessional contribution cap for those between the ages of 50 and 60 should be $50,000, rising to $75,000 per annum for those over 60.

Any annual contributions above this amount should then be taxed at the individual's personal tax rate rather than under the Excess Contribution Tax regime, it stated.

When asked whether raising the concessional contribution cap could create a potential tax loophole for members with already substantial superannuation balances, Stylianou said that it was "not really a huge amount of money" being considered for the proposed increase, so it would not necessarily represent an issue for the government.

"We did look at the different policy settings for whether or not you'd cap it and we decided that if the government needed to cap it probably would, but we didn't think it was necessarily a good idea to do that," she said.