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.”
Would be fair if the politicians also limited to more than generous superannuation benefits but off course they will never include themselves with us mere mortals.
Agree with your comment . Hearing on the radio this morning that Dan Andrews will receive an annual life time pension of $300k which surely assumes a capital balance well in excess of $3m .
Additionally he is permitted to start the pension now at age 51. So much for satisfying a “condition of release ” . Same rules should apply to everyone .
A person receiving a wage of $1,000 per week will receive SGL at $110 per week once the rate rises to 11%. From age 20 to age 65 and at 5.20% average investment return after tax this will create a balance of $3,115,362. Unless regularly indexed the proposed 30% tax on balances over $3million is actually designed to move all superannuation to 30% tax and to tax unrealised capital gains. The problem is not that our superannuation system is too generous, the problem is that politicians cannot control their zeal to spend other peoples’ money, often inefficiently. Perhaps they should legislate to ban budget deficits instead!!
Of course, politicians should work within budget and the various deoartments should work within their budgets. It is so easy to spend soneone else’s money. In business, if you keep going over budget, you go bankrupt. This is something that politicians dont seem to understand. And to jyst take other people’s money, simply because they can, reeks of communism.
If this legislation goes through, it needs to be across the board, including defined benefits pensions. I have self funded, or so I thought, allowing me to keep the help that I need and wamt to stay in my home. But that is now “deemed” to be too much. Well, for me, less than I have will not fund my present lifestyle which is why I worked so hard in the first place. I am aiming for 100% of my present income in retirement. It will not be the dignified retirement that I had planned for myself if it falls short of this.
I have not run the figures for the 2023 fy, but the 2002 fy was almost the equivalent of a 47% tax on “taxable income” using the Treasury Proposal. It is looking similar for the 2023 fy now that valuations have finally come through.
It was a mix of sheer hard work, a lot of sacrifice and a dose of good luck, and hard lessons, with the knowledge that I couldnt touch the finds if I needed it, until I reached a condition of release. My financisl plan which I implemented over almost 4 decades, will be devastated if this comes in. Fortunately the valuations keep running higher and higher each year with my mixed basket of eggs. But to pay tax on unrealised income will mean selling, as the income we needed for our dignified retirement would all go in tax except for $20k. I would have about 11 months left at the end of the money each year, so retriremeny now looks rafically different for me.
So many politicians get these huge sums at the end of their term for a retirement free from financial stress, after just a few years in publuc service. They don’t even have to work their super fund investments.
I just had a thought. Is this why so many are retiring abruptly? Do they see it being grandfathered and they know something that we don’t’?
I just can’t believe they want to tax unrealised gains… It is just so inequitable..