SMSFOA executive director Duncan Fairweather said that while the association agrees with the FSI’s recommendation that the government should seek broad agreement on the objective of superannuation, the primary objective recommended by the FSI is “too limited”.
The FSI recommended the primary objective should be “to provide income in retirement to substitute or supplement the Age Pension”.
“SMSFOA believes this definition is too limited and should be expanded to: ‘The purpose of superannuation is to encourage every Australian to be self-reliant and able to maintain a standard of living in retirement that bears a reasonable relationship to that before retirement by way of fair, equitable and efficient tax incentives that recognise the inherent bias against savings in the income tax system’,” said Mr Fairweather.
The Age Pension, he said, is intended to be a safety net for Australians who are unable to achieve self-reliance in retirement.
“Therefore it would be sensible for the government to set a target for the proportion of Australians who would need the Age Pension and expect everyone else to fund their own retirement with the help of tax incentives,” he said.
“When the superannuation system is mature and stable, most Australians should not need access to the Age Pension. This will clearly take time and targets should be set to ensure progress towards this goal.”
The target for each superannuation-funded pension should be 60-70 per cent of a person’s pre-retirement, post-tax income, SMSFOA believes.
“[This is] generally accepted internationally as a reasonable target and comparable with the public sector defined benefit schemes,” said Mr Fairweather.
SMSFOA also said it did not accept the idea from the Assistant Treasurer last week that superannuation tax incentives are “a gift from the government”.
“Just because the government doesn’t tax something or lowers a tax rate, it’s not a ‘gift’ from the government,” said Mr Fairweather.
“To assume otherwise is to believe that the government owns all income and decides what to ‘gift’ to citizens rather than believing that the money people earn is theirs and the government must justify taking some of it in tax.”
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I agree with Mr Fairweather. I wonder if there would need to be a small additional point regarding death benefits. Possibly the government would probably think it’s a gift for them and take the lot.
Well done SMSFOA. Sounds all very sensible.
Perhaps someone on $10m a year shouldn’t have the super system aimed at giving them $6.5m a year in income. Trying to define that could be difficult, and legislation can end up costing everyone to target a very small number of people.