A leading superannuation lobby group is calling on the federal government to put a cap on super balances, claiming the current system is “unsustainable” and unfairly benefits those with big incomes.
The Australian Institute of Superannuation Trustees (AIST) is proposing a limit of $5 million on super balances as it says those with big super balances are benefitting excessively from generous tax concessions.
Under the current system, money held in superannuation is taxed at just 15 per cent during the accumulation phase, only attracting higher tax when withdrawn. But the system allows wealthy people to make voluntary contributions to their super in order to pay less income tax.
Read: Thousands who withdrew super early ‘forced to do so’
The AIST says this promotes inequity in the retirement system and greatly favours those with large super balances.
“Unfortunately … the current level of lifetime government support provided through the retirement income system is heavily weighted towards those in higher income brackets,” the AIST says in its pre-budget submission.
“Given that this cohort has a greater capacity to support themselves in retirement, it is not only an inequitable situation, but also unsustainable as the population of Australia ages.”
With a federal election on the horizon, the AIST wants whoever is in charge to focus on making the retirement system fairer for all Australians.
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“Bumper super returns in 2021 are good news for those who benefit, but the figures disguise the fact that many Australians are being left behind in their retirement,” says AIST CEO Eva Scheerlinck.
“Although our retirement savings system is among the best in the world, the government has a great opportunity with the next budget to ensure it works to the benefit of all Australians, regardless of their gender, culture, education or socio-economic background.”
The AIST is hoping to persuade the government to take these changes to the national vote.
The LNP government has already introduced a raft of measures to the superannuation industry under its Your Future, Your Super legislation.
Read: Shock number of super funds failing to meet APRA’s benchmarks
And for the moment, it looks as though Labor agrees with the majority of those decisions and won’t be pursuing radical changes to the super system. Instead, it says it is aiming to bring stability to the sector by not fiddling with it too much.
“Should we win government in May, the way we would regulate the sector, stability and certainty are absolutely critical,” says Labor MP and opposition spokesperson for superannuation Stephen Jones.
“The industry has got to be able to digest stuff that is already in play, which is why we are not looking at a massive overhaul of any of the changes that have been put in place.”
Should the government stop fiddling with the superannuation system? Or does it still need work before it is fair? Should there be a cap on super balances? Let us know in the comments section below.
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