Retirement
Actuaries propose three-tier superannuation tax reform
The Actuaries Institute has outlined major reforms to Australia's $4.1 trillion superannuation system, proposing uniform tax rates and new levies on high retirement withdrawals.
Actuaries propose three-tier superannuation tax reform
The Actuaries Institute has outlined major reforms to Australia's $4.1 trillion superannuation system, proposing uniform tax rates and new levies on high retirement withdrawals.
A discussion paper commissioned by the institute recommends replacing the current two-tier tax system with a uniform 10 per cent tax on all super earnings.
Under existing rules, super funds pay 15 per cent tax during the accumulation phase and no tax in retirement.
"We have a superannuation system that's working, but it's one of the most complex in the world," said Richard Dunn, one of the paper's authors.
The reforms would introduce taxes on retirement withdrawals above $250,000 for lump sums and $150,000 for annual pension payments.
The paper also proposes changing the tax treatment of super bequests, applying a 17 per cent tax at age 67 instead of the current age 60.
"Our proposals make super simpler for consumers and funds, while improving equity across the system," Mr Dunn said.
These changes could save about $1 billion annually in operational costs over the long term, according to the paper's authors.
Actuaries Institute chief executive Elayne Grace said the reforms aimed to stimulate debate about meaningful tax reform.
"The authors have proposed well considered and holistic reforms. While views on superannuation tax reform vary widely, we welcome constructive debate about ways to improve equity within the system and deliver better value," she said.
Jennifer Shaw, another of the paper's authors, said the changes aligned with super's core purpose of funding retirement.
"They would leave the system largely unchanged for most retirees and still allow people to make large withdrawals for their immediate needs, for example paying off a mortgage or healthcare," she said.
The paper also recommends removing distinctions between how concessional and non-concessional contributions are taxed once invested in super funds.
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