Red tape hinders return to work plans

Nobody loves red tape, but there always seems to be a lot of it about.

Its intentions are usually well-meaning – ensuring protection and/or preventing rorts – but its outcomes are often frustration, anger and/or exasperation. That is particularly true when it comes to money – after all, who wants their money stuck in limbo?

According to advocacy group the Super Members Council (SMC), nobody does. Especially when it comes to super. The council has renewed a call for super red tape to be slashed, saying cumbersome rules result in double fees.

In a statement this month the SMC said: “The Australian government should slash red tape on super accounts in retirement.” This would, the SMC said, “save tens of thousands of retirees from paying two sets of super fees”.

The issue stems from a government ban on receiving contributions from part-time work or other sources into their retirement (decumulation) phase account. The law is outdated, says the SMC, and adds an extra layer of red tape and complexity to retirement. That complexity, “means some retirees are needlessly paying two sets of fees and often more tax than they need to”.

Want to go back to work? Super red tape says, “No”

Existing rules ignore the increasing fluidity of retirement, and the fact that around a quarter of Australians want to work into their 70s – on a part-time basis at least.

More than 2.5 million Australians are heading towards retirement in the next decade, with many expect to seek part-time employment.

“Increasingly, many Australians want to dip back into the workforce from time to time after they start their ‘capital R’ retirement,” said SMC chief executive Misha Schubert. “But instead of making that process easy, currently they must open a second super fund account.”

This brings with it the administrative hassle of transferring money across into their main retirement account. As a result, say Ms Schubert, “they pay extra fees – and perhaps more tax – than they need to.”

Australians met with this prospect when considering returning to work could be forgiven for remembering a classic Little Britain catchphrase, “Computer says no”.

An easy fix

Solving this red tape problem would be straightforward, says Ms Schubert.

“The easy fix is to legislate for Australians to be able to make super contributions from part-time work and other sources straight into their retirement account.”

According to estimates, about 100,000 retirees would benefit from the change, which would be relatively simple, the SMC said.

“The change would require a minor legislative update to the Superannuation Industry Supervision Act and tweaks to associated regulations. SMC does not propose changes to the pre-tax super contribution settings.” 

The SMC has proposed five recommendations, detailed in full here, would “make retirement simpler while keeping flexibility to meet retirees’ needs”.

“This simple red tape-busting reform would make retirement easier and more flexible for tens of thousands of Australians,” Ms Schubert said.

Have you run into red tape when looking to return to work? Would the SMC’s proposed changes make things easier? Let us know via the comments section below.

Also read: Modernising super could be a win for all Aussies

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Andrew Gigacz
Andrew Gigacz
Andrew has developed knowledge of the retirement landscape, including retirement income and government entitlements, as well as issues affecting older Australians moving into or living in retirement. He's an accomplished writer with a passion for health and human stories.
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