ACOSS today welcomed the Federal Government’s commitment to legislate the purpose of superannuation, as recommended by the Financial System Review.
“We welcome the decision to put into legislation the purpose of superannuation and call on the Government to follow this up with comprehensive reform of its tax treatment, ACOSS CEO Cassandra Goldie said today.
“There is a yawning gap between what the super system should do and what it actually does. The system should ensure that every worker has an adequate income in retirement above pension levels. In reality it has become a wealth accumulation and tax avoidance vehicle for people with high incomes.
“Reaching agreement on the purpose of superannuation is an important step in the reform process, but it should not delay the comprehensive tax reform we have been promised. It’s time to stop the endless tinkering with super and put things right.
“As the Government’s Financial System Review pointed out, half the tax breaks for super contributions go to the top 20% of taxpayers. This upside-down system of tax breaks for saving should be overturned, so that everyone receives the same tax break per dollar contributed to super. That means taxing contributions at marginal rates minus a rebate, instead of the present flat 15% tax rate. Reducing contribution caps would improve equity but it’s not reform.
“Super is supposed to be used as income for retirement but many people who already have significant wealth are using it to accumulate more as they grow older. The super system is being used to avoid tax by churning income and assets through super accounts, and the remaining assets are then passed on as an inheritance for adult children. Reform of superannuation should extend to the retirement phase, with fund earnings taxed at same 15% rate that applies earlier in life,” Dr Goldie said.
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