Treasurer Scott Morrison told those gathered at the Australian Financial Review Business Summit in Melbourne yesterday that the government was committed to enshrining the purpose of superannuation in legislation.
“Any changes that we make to superannuation will be about that purpose and making it fit for that purpose,” Mr Morrison said.
“How tax incentives are structured will no doubt form part of these changes, but the changes will be about delivering a fairer and more sustainable retirement income system for our 21st century economy, building on the pension reforms in last year’s budget,” he said.
“Where you have to target and make every incentive work for you is on those Australians who are most likely to be at risk of being dependent on a welfare payment into their retirement.”
Mr Morrison also stressed that superannuation was “not an estate planning tool”.
“That is not what superannuation, we believe, was designed to be. It was designed, as I said, to help people who might have otherwise been on the pension to have a pool of retirement savings that they can draw down on to live on and to enjoy a quality of life in their retirement that they have worked hard to achieve,” he said.
Mr Morrison said any changes to the superannuation system would not be about “revenue raising”.
“It is not about higher taxes to fund higher spending. It’s about a better retirement incomes system,”
the treasurer said.
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Surely a tax on withdrawal instead of contributions makes far more sense?
The government might have to defer their tax take, but it places a huge disincentive to withdraw large lump sums, therefore making the average super balance last much longer.
Like with everything else, the government of the day, doesn’t think it through properly.
Changing super rules, they will just make people to pull the funds out of super, and instead of encouraging people, specially younger generation they are pushing them further away. People don’t have faith in the government.
I agree Terry.
The ideal situation would be to pay no tax on contributions but pay 15% tax on withdrawals.
Will not happen because it means that they government has to wait 30 years to get their hands on the money.
If they want to make it fir for purpose, they will –
1. NOT cut contributions;
2. will abolish the 15% upfront tax, BUT
3. require all benefits to be paid as taxable life-expectancy based private pensions or annuities, including joint and reversionary for spouses and dependent children
4. not worry about preservation and
5. apply a $1 for $1 income test against all Commonwealth income entitlements (age pension, newstart etc)
That would be logical. It would make sure superannuation serves as an income replacement mechanism and ease the taxpayer burden of welfare pensions.
But I fear social envy, not cool dispassionate, disinterested, logic and fairness will prevail.
Mr Morrison needs to understand that estate planning and super and intrinsically linked. Quite simply, people die. Chances are, there will be many people who die without spending every last cent they have accumulated. Therefore they should plan to deal with any remaining super benefits. My understanding of the purpose of super as it currently stands is to provide benefits on the retirement or DEATH of a member. I don’t believe DEATH can be separated from superannuation unless Mr Morrison has discovered the secret to immortality.