Australia's growing honey pot – superannuation – is currently worth $2 trillion and provides generous concessions to all, particularly high-income earners.
The Turnbull-led government has confirmed that all tax reforms are "on the table", including radical changes to our superannuation tax system. With support from both Labor and the Greens, it is likely that some of these will hit our super system in the next few years.
A recent report by Deloitte suggests that our superannuation tax should be simpler, fairer, and more sustainable; one where everyone gets the same tax advantage from each dollar going into super, with a concession of 15 cents in the dollar for both high and low-income earners.
"That means a person on an effective 21 percent marginal rate (including Medicare) pays a contributions tax of 6 percent while a person earning between $180,000 and $300,000 on a 49 percent marginal rate (including Medicare and the temporary Budget repair levy) pays a contributions tax of 34 per cent."
This reform would provide savings of around $6 billion per year in 2016-17, which could be used by the government to shift the company tax rate down from 30 percent to 26 percent, help close the budget deficit, or to fund social spending.
Making the superannuation system sustainable is important, but it shouldn't take priority over other important initiatives such as the Medicare system review simply because super is a big and easy target.
According to the Association of Superannuation Funds of Australia (ASFA), the average Australian superannuation balance for men and women aged 60 to 64 years old was only around $197,000 and $105,000, respectively, in 2012.
With statistics such as these it is likely that the majority of Australia's population will still be somewhat reliant on the aged pension for decades to come. Therefore, any changes to the super system should ensure they will deliver maximum bang for the taxpayers buck and reduce the number of citizens requiring the pension in the future.
You are never too young to start planning financially for your retirement, however, if you are in the critical age bracket of 60-64, you should be discussing your retirement strategy with a qualified and experienced financial planner before any changes are made to our superannuation tax system.
