The SMSF Owners’ Alliance (SMSFOA) said it was pleased the paper acknowledged there are arguments in favour of tax concessions for superannuation savings.
The lobby group said it also supported the paper’s suggestion that “a perspective on fairness is taxes paid, and benefits received, relative to a person’s lifetime income”.
It also states that “the tax concessions in super have to be judged taking into account Australia’s full retirement income support arrangements, including the means-tested Age Pension”, said SMSFOA.
“We fully support such sentiments and have consistently modelled the impact and fairness of super by including its interaction with the Age Pension and taking into account lifetime taxes paid.”
SMSFOA said there are, however, questions that need to be resolved during the Tax White Paper process.
One area that SMSFOA believes should be explored is whether the superannuation system is adequately achieving its purpose by “locking objectives more firmly into legislation in order to minimise subsequent fiddling with super”.
This was also addressed by SMSFOA in its response to the final report of the Financial System Inquiry.
SMSFOA said a significant recommendation in the final report is that a broad political agreement should be sought on the objectives of the superannuation system and enshrined in legislation.
“We strongly agree [that] while it probably always will be necessary to review and improve the superannuation system as it evolves, a bipartisan approach will lessen the urge by Governments to tinker with superannuation and give Australians more confidence that their superannuation savings are secure,” said SMSFOA.
“Ideally, superannuation should be a ‘no go zone’ in the Federal Budget.”
SMSFOA said the Tax Discussion paper also needs to look both at the most effective and fairest ways to maximise retirement savings in order for Australians to support themselves, and at how people’s perception of the age pension can be altered so that it can be viewed as a “last resort rather than an entitlement”.
All that is required is that superannuation be taken as a life pension or annuity based on age at time of withdrawal and apply a $1 for $1 income test against any Commonwealth benefit. You would then not need a preservation age and you could allow stop/start pensions to cover changes in life cycle. Nor would you need to tax as the system would be reducing welfare spending across most social security payments.
But envy and more taxation will probably win the day, so I expect that people will be asking tax lawyers for better investment vehicles and I am happy to oblige.