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ASFA calls for changes to improve super system equity
The Association of Superannuation Funds of Australia (ASFA) has recommended changes to the low-income superannuation tax offset and disagreed with the findings of the Retirement Income Review (RIR) in regards to the superannuation guarantee (SG) as part of its pre-Budget submission.
While the superannuation system is well-designed and working for the majority of Australians, ASFA said there was merit in addressing concerns about fairness in the system.
“In this context, recent changes to tax rates have created an unintended distortion where low-income earners between $37,000 and $45,000 pay a similar tax rate on superannuation contributions to the marginal tax they pay on wages,” ASFA said.
“ASFA recommends that the low-income superannuation tax offset should apply to individuals with taxable income of up to $45,000.”
However, it acknowledged there was a fiscal impact and there are equity grounds for adjusting settings applicable to those with higher incomes and/or high account balances as well.
“In this regard, ASFA considers that equity across the system can be improved through a modest reduction in the Division 293 threshold from $250,000, removing indexation of the transfer balance cap and removing balances above $5 million from the concessionally taxed superannuation system,” ASFA said.
Although ASFA agreed with many of the conclusions of the RIR, it strongly disagreed with the assessment that increasing the SG to 12% would have a negative impact.
“ASFA research has found that 75% of Australians support the legislated phased increase to a 12% SG,” it said.
“The initial increase to 10% is a cost to business of less than one dollar a day for the average worker.
“For many Australians the increase to 12% SG is essential to offset the financial loss from super withdrawn under the COVID-19 early release scheme, which has impacted on younger and lower income Australians in particular.
“ASFA considers the legislated change in SG needs to go ahead as scheduled on 1 July, 2021, with full implementation by 1 July, 2025.”
It also recommended to help improve retirement for people working in the gig economy and in other circumstances where they were missing out on super, that there was a need for a new “dependent contractor” category for the SG, tougher sham contracting penalties, SG for the self-employed and elimination of the $450 threshold for entitlement to the SG.
“In addition, technology is changing and with Single Touch Payroll we are well placed to modernise the system and allow super to be paid at the same time as wages,” Dr Martin Fahy, ASFA chief executive, said.
“This initiative would make the system more efficient and protect people’s savings.”
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