In a 43-page submission to the tax review, Industry Super Australia (ISA) has called on the Federal Government to temper the changes to the Age Pension that are due to come into effect on 1 January 2017. The ISA believes that winding back the Age Pension changes, along with drastically reducing annual superannuation contribution limits, will make the retirement system more coherent and should encourage low- and middle-income earners to save.
“It would be a serious mistake to think that significant short-term budget savings are available from the super system. Without careful thought we could make the system worse not better. Short term savings could come at a long-term cost,” said Industry Super Australia Chief Executive David Whiteley.
The ISA has said in its submission that the January 2017 changes to the means testing regime for the Age Pension would achieve savings for the Government in an untenable manner. The ISA is suggesting that the taper rate, which is due to increase to $3, needs to be increased by a lesser amount, to $2.
The ISA’s proposals contained in its supplementary submission to the tax review include:
- a 25 per cent rebate for all income earners on contributions (capped at an appropriate level) and limiting total contributions to $50,000 per year, rather than $230,000 currently
- A targeted Superseed contribution paid into the accounts for younger workers, particularly women to maximize the magic of compound interest
- a fairer Age Pension asset test with a taper of no more than $2 per $1000 of assets
- level earnings taxes of 15 per cent in accumulation and the retirement phase with a rebate for earnings under $50,000 per annum in retirement.
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The last three years have seen significant changes to the retirement landscape in Australia, but even after all these changes, the future of the retirement system is still uncertain.
The latest submission by Industry Super Australia (ISA) has thrown another difference of opinion into the ring. The suggested changes make a lot of sense, but a Federal Government struggling to rein-in a budget deficit may not see them in the same light.
The retirement system is too important to the economic success of Australia’s future to simply accept changes on face value. We should be encouraging organisations such as ISA to work alongside Government in preparing a sustainable model that focuses on the big picture for all Australians.
What do you think? Is the Federal Government too focused on reducing the budget deficit to ensure there’s a retirement system that will have an outcome that’s better for the country and those in retirement? Are you feeling uncertain about your future because of the confusion over the future of the retirement system and the constant changes?