Solve super tax inequity, says MurrayBY JAMES FERNYHOUGH | THURSDAY, 11 DEC 2014 12:25PMThe upcoming tax white paper must redesign the taxation of superannuation so that it no longer disproportionately favours wealthy people, according to the Financial System Inquiry final report. Related News |
Editor's Choice
TCorp reorganises investment team
In pursuit of a new operating structure and "simpler portfolio environment", TCorp has created four new investment roles and will farewell its head of portfolio construction and head of portfolio delivery.
Major themes to watch in the ETF space
Speaking at the inaugural Future Investing Forum, experts shared their thoughts on what to expect from the ETF market over the next 12 months.
UK forewarns Australia on wholesale test changes
After recently backflipping on changing its high-net-worth investor (HNWI) tests, the UK serves as a cautionary tale for Australia as it mulls overhauling its own wholesale investor thresholds.
Jim Lamborn retires from JANA
Jim Lamborn has retired from the asset consultant after more than two decades on its leadership team.
Products
Featured Profile
Matt Gaden
HEAD OF AUSTRALIA
JANUS HENDERSON INVESTORS (AUSTRALIA) LIMITED
JANUS HENDERSON INVESTORS (AUSTRALIA) LIMITED
Helping investors traverse financial markets and build their wealth during the peaks and troughs is Janus Henderson Investors head of Australia Matt Gaden's game plan. He tells Karren Vergara why in this long game of investing, active management wins.
On the subject of equity, the report stated that superannuation tax concessions were "not well targeted", with "a small minority of members" holding "a high proportion of superannuation assets."
The FPA has, in the past, released data confirming that those who seek advice do benefit financially from having done so. So, if the report is concerned that it's the minority who hold the high proportion of superannuation assets and to address this, logic suggests, that more should seek advice, why are the legislators making it so hard for the average individual to be able to afford to receive that advice?
At every turn, the costs to run an advice business is increasing, not to mention the added burden of red tape thrust upon us with absolutely no benefit to the client.
Varying tax scales being applied to member account balances; simple in description, far more complicated to implement, maintain and regulate. It seems contradictory to suggest these sort of changes, in the current climate of making Superannuation in Australia less expensive.
On the subject of equity, the report stated that superannuation tax concessions were "not well targeted", with "a small minority of members" holding "a high proportion of superannuation assets."
Does the bottom decile get 40% of the government aged pension support with the next decile getting the 20%?
The point of superannuation having concessional tax treatment is to encourage people to save for their retirement, and impose less of a burden on the government at retirement, for example in terms of requiring aged pension support. In its current form, the majority of superannuation benefits go to those people who need it least, and would have imposed little burden on the government in terms of pensions in any case. (Do the top quintile really need incentives to save for retirement? I'd suggest we don't.) Given that tax expenditures in the form of superannuation concessions are one of the biggest forms of "spending through the tax code" in Australia, and the level of tax expenditures in this form are nearing the level of pensions being paid, and will surpass them sometime soon, it seems inevitable that this will eventually happen.
I agree that advice can lead to people taking better advantage of the benefits from superannuation, and that is good for the individuals. But what is good for an individual in the context of what is currently in place is a different matter to what is good public policy.
Better targeting superannuation benefits might make it harder to demonstrate the value an adviser is giving to a client (pointing out two otherwise identical scenarios, one with additional super contributions versus one without), advisers will still be able to provide tremendous value to clients.