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
Platinum announces strategic review
Platinum said following the review Platinum Capital and Platinum Asia Investments may be wound up.
Sequoia chief's job at stake in upcoming EGM
Sequoia Financial Group will hold an Extraordinary General Meeting (EGM) in June that will consider a resolution to remove chief executive and managing director Garry Crole.
Scott Farquhar steps down from Atlassian
After more than two decades at the helm, Scott Farquhar will step down as co-chief executive of Atlassian.
Goldman Sachs ditches robo-adviser Marcus Invest
The investment bank is offloading Marcus Invest to Betterment just three years after announcing it will launch the digital adviser.
Further Reading
Sponsored by | Where do advisers invest their time?The stage 3 tax cuts have sparked discussions on bracket creep. Implementing a tax-effective investment strategy is crucial now more than ever. |
Sponsored by | Quality and Yield. A Powerful combination.With central bank rates seemingly peaked, investors are not awaiting yield increases. We're bucking the trend with investment rates at decadal highs |
Sponsored by | Why it could be a good time to be a growth contrarianGrowth-style companies are in vogue, but you may need to think outside the box to ensure you don't overpay. |
Products
Featured Profile
Fiona Mann
HEAD OF LISTED EQUITIES AND ESG
BRIGHTER SUPER
BRIGHTER SUPER
Brighter Super head of listed equities and ESG Fiona Mann was shaped by a childhood steeped in military-like discipline and global nomadism. Andrew McKean writes.
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.