Reducing the current caps for concessional contributions could result in short-term gains for the budget deficit but will be detrimental in the long term, the Institute of Public Accountants has warned.
IPA chief executive Andrew Conway said the government should consider actually increasing the current concessional contribution levels for certain age groups.
“Increasing the concessional contribution caps for those aged over 50 years would allow them to more adequately prepare for retirement in their final phase of employment,” said Mr Conway.
“Whilst increasing the concessional contribution caps may be a cost in the short term, to the government, it will help to increase Australians’ superannuation balances and therefore reduce the number of people reliant on government benefits in the future.”
Mr Conway said an increase to the caps could also help address the gender inequality that exists within the structure of superannuation in Australia.
“With women on average having lower superannuation balances than males of the same age, other than those in the youngest age bracket, it becomes even more critical that we provide them with the opportunity and means to increase their superannuation balances as they prepare for retirement,” he said.
Speaking to SMSF Adviser, IPA executive general manager, advocacy and technical, Vicki Stylianou said the government would perhaps be better changing the taxation of contributions for certain income levels.
“I think that might end up being the area where we can get the greatest consensus,” she said.
“it’s a balancing act; the government needs revenue but, at the same time, putting higher taxes on certain parts of superannuation means you might dampen people’s enthusiasm about contributing more to super. It’s about working out where you put the greatest incentives.”
Ms Stylianou stressed that any changes within the super system need to be made as part of a “holistic look at retirement income policy”.
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