Australia’s actuaries have added their voice to a growing body of industry experts who say there should be a limit to the amount of super people can accumulate using generous tax concessions.
In a submission to the Federal Government’s tax white paper, the Actuaries Institute says a lifetime cap of around $2.5 million on superannuation savings is about the right level.
Taking about 5% of that amount as a pension in retirement would create a revenue stream greater than $10,000 a month.
There are about 24,000 Australians with super account balances of more than $2 million, according to the Association of Superannuation Funds of Australia. And there are 475 people with super fund balances of more than $10 million.
Other submissions to the tax white paper, including Australian Super and Industry Super Australia, have pointed to the wealthy using super to keep their tax low and as a vehicle to build tax free estates rather than as a retirement income generator.
The actuaries see unfairness in the system for low income earners. Those earning up to $37,000 get little or no tax concessions on their super contributions. The actuaries say the 15% contribution tax is actually a penalty for those earning less than the tax free threshold of $18,200.
Estelle Pearson, the president of the Actuaries Institute, says now is the time to fix the superannuation and pension systems.
“It is not good enough to say that superannuation is out of bounds for revision and review,” Pearson says. “Via a summit or an independent panel of experts, the government should be taking advice that will halt the obvious and perplexing discrepancies that are emerging in current policy and which are confusing many workers and retirees.”
The actuaries also recommend applying a 30% tax rate on super for those earning above $180,000 a year. Currently the high tax cuts in above $300,000.
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