Mr Fraser said that in the 25 years since the introduction of compulsory superannuation, it was evident he and the wider industry had made some mistakes along the way, Fairfax media reported.
“We are not smart enough in Treasury – we are pretty smart, but we are not smart enough – to model third, fourth and fifth rounds of reactions to policy measures,” he said.
“I think the time has come 25 years or so after those big reforms to have a more fundamental rethink about the interaction between superannuation and tax and the whole welfare system.”
Mr Fraser said questions concerning taxation and the super system are difficult to debate, but the “Intergenerational Report is another reminder that they are not going to go away”.
These comments follow an acknowledgement by Treasury’s executive director of revenue group, Rob Heffron, earlier in the year that Treasury’s tax expenditure statement is “not a policy message”.
Mr Heffron said it is only meant to be a measure of the amount of money “potentially” foregone.
“Some have suggested simply because there is a large measured expenditure, government should necessarily do something about it. That is not the case,” he said.
Others in the super industry have noted the need to adopt a more “sophisticated model” for determining the true cost of superannuation concessions.
AMP SMSF’s head of policy, technical and educational services, Peter Burgess, previously told SMSF Adviser it’s necessary to have a more holistic approach to calculating superannuation tax concessions.
“If we’re going to move this debate forward, we’re going to need a lot more holistic and sophisticated approach to valuing these tax concessions, with a model that does factor in the offset in reductions in the age pension costs,” said Mr Burgess.
Basic principles
1. Superannuation is a form of lifetime income averaging for taxpayer, spouse and dependent children.
2. Therefore benefits should be paid as life annuities or pensions (including account based) to wage earner, spouse and/or dependent children.
3. All Commonwealth income benefits should be income tested $1 for $1 against any super pension.
4. No need then for preservation or rules against deductible contributions up to level of personal exertion income. People will be saving themselves out of eligibility for public charity if benefits paid as private pensions.
5. Age pensions should be made non-taxable advances against the estate (a zero interest reverse mortgage. This is NOT a death duty.
6. Allow taxpayers the options of claiming deductions for income transferred to aged parents in lieu of age pension.
At last we may get some top down review of the whole system instead of Band-Aid type quick fix measures. We can only hope that any changes will make national sense and both parties can discuss and agree what is in the best interests of the whole nation and not just sectional parts or heavy handed hitters like banks, insurance companies and financial advisors. We should welcome sensible changes after discussion and not have unwelcome changes thrust upon us just to score more party votes. Do it once and get it right.