Retirement
EY tips big changes for superannuation
EY believes that despite big-ticket tax items like GST effectively being removed from the reform agenda, superannuation members should brace themselves for significant changes in the upcoming federal budget.
EY tips big changes for superannuation
EY believes that despite big-ticket tax items like GST effectively being removed from the reform agenda, superannuation members should brace themselves for significant changes in the upcoming federal budget.
While items like a GST hike have been effectively shelved, EY Australia’s superannuation leader Maree Pallisco said that “unfortunately” superannuation tax concessions appear in the government’s firing line.
“From what we understand, the government is looking for anywhere between two billion to six billion dollars from the superannuation industry, and there is no other way to do it unfortunately,” she said.
Ms Pallisco said while she’s unsure exactly what will be on the chopping block, she suggests high-income earners will be a prime target.
Brad Eppingstall, director at RSM Australia, also believes that tax concessions on contributions are set to be limited by the government.
“If you look at what has been ruled out – superannuation is one of the things that hadn’t been ruled out yet,” Mr Eppingstall said.
“This year, super is going to be a big issue,” he added.
He cited a recent Grattan Institute report, which suggests that wealthy people who use superannuation funds to reduce their tax rates should be stopped by limiting the amount of pre-tax income they can get concessions on, and ensuring earnings in retirement are taxed.
“Currently, people earning less than $300,000 per annum pay 15 per cent tax on their pre-tax compulsory contributions, while those earning more than $300,000 per annum pay 30 per cent tax. This has let the wealthy use superannuation to minimise tax, rather than to save specifically for retirement,” he said.
Mr Eppingstall also believes transition to retirement pensions are set to be dropped, given the potential multi-billion-dollar budget saving.
Federal Treasurer Scott Morrison has been foreboding significant changes to superannuation for some time now. Recently, he said “hard decisions” lie ahead for the government, as it evaluates the purpose and effectiveness of super tax concessions.
“It’s great that people are saving for their own retirement. They do it in super and many other forms. But I believe they raise questions about the purpose of the concessions […]; certainly they boost retirement incomes to the extent that their absence would result in lower balances, arguably. However, what is less clear is where the concessions for high-income earners increase savings behaviour or relieve pressure on the age pension,” Mr Morrison said.
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