Changes to super are an attack on the system: auditor
The proposed $3 million super tax is an attack on the superannuation system as a whole, undermining what is globally accepted as the sixth best retirement system in the world, says a leading auditor.
Naz Randeria, managing director of Reliance Auditing Services, said despite the planned superannuation changes not being headline news anymore, there are still concerns regarding their potential implications for the foundation of the country’s superannuation system.
According to the 2022 Mercer CFA Institute of Global Pension Index Report, Australia’s superannuation system is ranked sixth in the world behind Iceland, the Netherlands, Denmark, Israel and Finland.
The report stated that Australia’s system ”has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A-grade system.”
However, Ms Randeria said that ranking will be in jeopardy if the proposed legislation is implemented as planned by 1 July 2025.
“There are still numerous questions to be answered around how the changes will impact not only current and future retirees, but the superannuation system itself,” she said.
She said while the government had “spruiked” the $3 million super tax proposal as a tax on the rich, this was “simplistic and insulting”.
“It makes the assumption that $3 million dollars is a lofty balance, out of reach of the majority of Australians, and therefore the changes won’t have an impact on most people,” she said.
“This couldn’t be further from the truth.”
She continued that the proposal is an attack on the stability of the system and shatters the belief that people can plan for their retirement, with aspirations of being able to be self-sufficient.
“Self-sufficiency is the idea that a person has saved enough money in their superannuation account throughout their working life to ensure they require no extra financial help in retirement, such as the aged pension,” she said.
She added the planned changes will actually act as a disincentive for people to save by penalising those who have stuck to the current rules and regulations.
“By actively discouraging people to save, it will increase reliance on the aged pension, which will cost the Government more money in the long term,” she said.
“While the increased tax rate is expected to generate around $2.3 billion dollars in Government revenue in the first full year of operation, I would like to see modelling demonstrating the economic impact of an increase in the number of people receiving the aged pension over time.
“I would also like to see modelling outlining the hit to Government revenue when people start withdrawing assets and funds from their superannuation accounts, to bring them back under the $3 million dollar threshold.”
She said if the $3 million super tax legislation passed it could see an increasing number of people pull assets out of their accounts which could have far-reaching impacts for other sectors of the Australian economy.
Additionally, she said, the figure of $3 million does not seem to be based on any calculations and fails to consider the rises in cost of living, inflation, and life expectancy.
“It makes no sense to tinker with a world-class superannuation system at a time when we’re living longer than ever, and day-to-day living costs have never been higher,” she said.
“I would encourage the Government to instead look to longer-term policies that encourage more people to contribute to their own superannuation and work toward self-sufficiency in the future, rather than chasing a short-term sugar hit that will leave a bad taste in the mouths of all Australians.”
