Seven months on from the Federal Government’s announcement that it will shift the goalposts for Australia’s superannuation system, the topic is no longer headline news, but that doesn’t mean concerns around the planned changes have abated.
In fact, as the planned introduction date of July 1, 2025, inches ever closer, there are still numerous questions to be answered around how the changes will impact not only current and future retirees, but the superannuation system itself.
The Government’s plan to double the tax from 15% to 30% on superannuation balances above $3 million dollars has been spruiked to the general public as a ‘tax on rich people’, however this is a simplistic and insulting argument.
It makes the assumption that $3 million dollars is a lofty balance, out of reach of the majority of Australians, and therefore the changes won’t have an impact on most people.
This couldn’t be further from the truth.
Doubling the tax rate is an attack on the superannuation system as a whole, undermining what is globally accepted as the sixth best retirement income system in the world.
It is an attack on the stability of the system, the belief that you can plan for your retirement, and that you should aspire to be self-sufficient.
Self-sufficiency is the idea that a person has saved enough money in their superannuation account throughout their working life to ensure they require no extra financial help in retirement, such as the Aged Pension.
The planned changes will act as a disincentive for people to save ‘too much’, by essentially penalising those who have played by current rules and regulations to put aside as much of their money as possible.
By actively discouraging people to save, it will increase reliance on the Aged Pension, which will cost the Government more money in the long term.
While the increased tax rate is expected to generate around $2.3 billion dollars in Government revenue in the first full year of operation, I would like to see modelling demonstrating the economic impact of an increase in the number of people receiving the Aged Pension over time.
I would also like to see modelling outlining the hit to Government revenue when people start withdrawing assets and funds from their superannuation accounts, to bring them back under the $3 million dollar threshold.
Australia’s superannuation assets totalled $3.5 trillion as of the 2023 March quarter – with superannuation funds playing a crucial role in investing in Australian businesses and key infrastructure projects, stimulating economic growth and job creation.
Should these changes be passed and an increasing number of people pull assets out of their accounts, the economic impact could be significant.
It should also be noted that the $3 million dollar figure chosen by the Government – seemingly at random – fails to consider cost of living increases, inflation, or regional disparities, as well as our increasing life expectancy.
It makes no sense to tinker with a world-class superannuation system at a time when we’re living longer than ever, and day-to-day living costs have never been higher.
I would encourage the Government to instead look to longer term policies that encourage more people to contribute to their own superannuation and work toward self-sufficiency in the future, rather than chasing a short-term sugar hit that will leave a bad taste in the mouths of all Australians.
Naz Randeria is the Managing Director of Reliance Auditing Services.
About Reliance Auditing Services
Founded by Managing Director Naz Randeria over a decade ago, Reliance Auditing Services is an independent auditing services firm, specialising in audit of self-managed superannuation funds and also providing external audit and assurance services to clients across Australia. The team offers more than 25 years’ experience across a very diverse range of businesses and organisations.
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