Speaking to SMSF Adviser, Omniwealth’s managing director Matthew Kidd said the current concessional contribution cap must be raised if the super system is to be successful in reducing the burden on the social welfare system in the future.
“I would ideally like to see people, at least those over the age of 50, being able to put upwards of $100,000 a year into super concessionally and maybe have it tiered so that once you’re over 40 you can go up to 50,000.”
Mr Kidd said calculations of what someone needs to retire on and what they can put into super at the moment shows a significant gap.
“There’s going to be pressure on the social welfare system down the track because people can’t put enough into super,” he said.
“It’s a bit of a ‘rob Peter to pay Paul’ scenario; you’ve prevented or reduced the amount of money going into super to stimulate the economy and keep the economy ticking over but you’ve done damage down the track.”
Mr Kidd said when Gen X investors and the younger baby boomers begin to retire, there’s going to be a gap between what they have in super and what they need to retire on.
“The whole idea of the superannuation system was to take the burden away from the taxpayer,” he said.
Stuart,
The other issue is Workcover that in SA ceases at 65. Yet my wages (at age 69) are subject to the premium none the less. Hardly equitable. And yes I know I am talking about a State based tax.
Ralph, what you state is factually correct however the debate is too limited.
What is the cost of the aged pension, health care and pension benefits card to the “State” when someone didn’t have the capacity, OR CHOSE NOT TO PLAN FOR THEMSELVES.
There is a catchall system which is good, far better than the safety net in the USA which has massive holes in it that people fall through.
The problem in this country is there is not enough responsibility placed on the MAJORITY of the population to do some heavy lifting in long term planning.
A case in point, the 2% kicker to 49% for three years on income tax. The money raised only provides approximately 25% of the INCREASE only in health and welfare spending, it needed to be 8% to cover one years increase. Another 8% next year?
There are just not so many of these “evil wealthy people” compared to the vast majority who feel the world owes them a living.
[quote name=”Andrew”] People complaining about ‘tax benefits for the rich’ will likely see the parring back of concessional tax rates for super savers.[/quote]
Plkaying the Devil’s advocate for a minute, if working “rich” can contribute $100,000 concessionally to super then they are moving income from the highest 2 tax brackets to the lowest. For example, a person on $120K a year could then drop $80K into super and save themselves over $17,000 in tax. How is that not a tax benefit for the rich?
They have basically removed the tax that would support another person’s pension and kept it for themselves.
Surely not paying the tax and lessening the amount available to pay pensions puts more pressure on the social welfare system?
It seems to me that Super is changing from its purpose to enable someone to have a more comfortable retirement to a wealth accumulation and tax minimisation vehicle.
I agree with the comments. We have so many contradictions in our system. For example, why is an individuals “top ups” not allowed as a tax deduction? why do we have whole separate process for employees who may want to add to their contributions without going through salary sacrifice (or it may not be available to them), why do we have a whole separate set of rules for the over 65’s. When these rules were set up, the mortality rate was very different and I have many clients working well into their 70’s (I have one employee of 80 years and clients in late 70’s who earn many times the average age who would continue to contribute if they were allowed to.
Our whole system has enormous inconsistencies and lacks a certain consistency.
I absolutely agree, unfortunately though it looks like the system is working in the opposite direction. People complaining about ‘tax benefits for the rich’ will likely see the parring back of concessional tax rates for super savers.