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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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?