A Liberal National senator for Queensland has said the superannuation guarantee contribution should remain frozen, as increasing it will have “perverse outcomes” for those on average or below-average incomes.
Speaking to SMSF Adviser, Rockhampton-based Queensland senator Matthew Canavan said the issue of raising the superannuation guarantee from 9.5 per cent to 12 per cent is an area where the government should “tread carefully”, and that he believes it should stay where it is.
“I think we’ve forgotten the lessons of the Henry Tax Review, which clearly showed that lifting this rate much higher than where it’s at would have the perverse outcome of people on average or below-average incomes actually having a higher level of consumption in retirement than in their working life,” said Mr Canavan.
“Most people don’t need as much money in retirement as they have in their working life because they’re not raising kids and travelling to and from work, and I don’t want to do anything that causes poorer people or people on a below-average income to have a tougher life.”
In terms of taxation policy for superannuation, Mr Canavan said he believes it would be unfair to change the taxation arrangements for people’s balances or their earnings because many people have contributed to their fund over several years.
“If we start tinkering with things after they’ve made a decision, after they’ve contributed for many years, it will breed a lack of confidence in the system,” he said.
However, he said there are options for making “forward-looking changes” on the contributions side or on the contributions tax, which is currently at 15 per cent.
“We’d announce it and people would know from now on anything you would put into super would be taxed at a different rate, although there’s no necessity in my mind to keep that as sacrosanct,” he said.
“Just as other tax rates change or income taxes in response to different budgets' circumstances, there may be a case where the contributions tax should change in the future.”
Any change, he said, should be forward-looking in the sense that it changes incentives for “what people do in the future, not what they have done in the past – so that we’re not defrauding people”.
“As much as possible it should be grandfathered of course, depending on the change, there may be no need for formal grandfathering but we should be very careful to avoid [making] any ‘after the event’ rule changes on people.”
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