The Federal Government may be forced to make further changes to the superannuation tax regime in circumstances where a majority of submissions so far received by the Parliamentary Inquiry into improving the superannuation savings of people under 40 points to tax as being a primary inhibitor.
The submissions so far received by the House of Representatives Stand Committee on Economics, Finance and Public Administration reveal remarkable unanimity on both the need to cut taxes and the efficacy of the Government’s superannuation co-contribution regime.
While people such as Government Senator, John Watson, may have been careful in the manner in which they have couched their suggestions with respect to the tax regime, the overwhelming message provided in the majority of submissions is that young people will be more inclined to save for their retirement if there are clear-cut incentives to do so.
The submission of the Association of Superannuation Funds of Australia puts it most succinctly suggesting that, “in order to better meet the retirement income needs and expectations, contributions be increased in effect to an amount equivalent to 15 per cent of wages through a combination of compulsory contributions, voluntary contributions and tax relief.”
For its part, the Industry Funds Forum also argues for a reduction in the contributions tax for low income earners, by way of a tax credit of 15 per cent for those with taxable incomes up to $28,000 scaling back to zero for those with taxable incomes above $58,000.
The importance of the tax element in superannuation is made even clearer in the submission from Comsuper’s Leo Bator who said there was no immediate advantage for contributing to superannuation.
The notion of age-based tax deductions is also suggested by Telstra subsidiary, Australian Administration Services which said consideration could be given to introducing an age-based tax deduction, or possibly a rebate, for voluntary contributions made to superannuation,” akin to the Lifetime Health Cover loadings but in reverse, commencing with the maximum available deduction at age 18 and phasing out to zero after age 40.”
While tax concessions and rebates were the focus for many submissions so too was the notion that people should be compelled to make personal contributions, with the Small Independent Superannuation Funds Association suggesting “employees should be compelled or actively encouraged to make contributions to supplement compulsory employer superannuation support.”
