Super changes to tax free income

The Association of Superannuation Funds of Australia (ASFA) and Westpac are pushing for a limit of around $2.5 million to be set on the amount of tax-free money each Australian can use to fund their retirement.

This restriction would see the amount of tax-free income that can be earned each year in retirement capped at $120,000. This restriction would affect around 70,000 retirees who otherwise receive tax free earnings of over $120,000 from their superannuation.

The research presented in the submission has revealed that there are currently 475 Australians with superannuation balances of over $10 million earning, on average, $1.5 million a year tax free in retirement.

Prime Minister Tony Abbott has suggested his government won’t make any changes to the current superannuation rules, but the Labor party have proposed a policy which would see a $75,000 tax-free limit with any earnings thereafter taxed at the concessional rate of 15 per cent.

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Opinion: The rich get richer

Now is the time for Tony Abbott to stand up as a Prime Minister. The current superannuation system is flawed in how it rewards the rich in retirement with tax-free incomes, without a cap, and Mr Abbott needs to lead a sensible change to the current law.

A comparison of the current system could be drawn between superannuation contributions and multinationals profit-shifting to avoid tax. Both forms of action are currently legal in this country. Both benefit the top 10 per cent, but there is currently only a focus on the companies that operate from outside our shores.

The submission presented by ASFA and Westpac from the outside look to be reasonably thought out and sensible as a starting point. I would ask whether they actually go far enough when you consider the ASFA Retirement Standard states that a couple requires a retirement income of $58,444 per annum to live a comfortable lifestyle.

It’s clear to see that progress has to be made and a limit needs to be set. Mr Abbott, please, take a look at how unfair the current rules really are and take a stand on behalf of the Australian taxpayer.

What do you think? At what amount should the annual tax-free super income be capped? Is Tony Abbott failing Australians who voted for him by refusing to make changes to the current super rules?

Written by Drew

Starting out as a week of work experience in 2005 while studying his Bachelor of Business at Swinburne University, Drew has never left his post and has been with the company ever since, working on the websites digital needs. Drew has a passion for all things technology which is only rivalled for his love of all things sport (watching, not playing).
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