Super to the Rescue - but at what cost? - 1 May 2009
Not only is super meant to support the retirement income needs of Australian's, it's now being seen as a source of revenue to help fund the Federal Government's stimulus packages. Having committed to an ambitious spending program the objective of the Federal Government now, having spent the budget surplus, is to find new sources of income in an environment of declining revenue to improve the look of the budget's bottom line.
Superannuation offers the perfect target to boost Government revenue as Australian's are enticed to contribute to super and provide for their own retirement with attractive tax incentives. Cutting back these incentives by, for example, reducing the amounts that can be contributed into super (for which a deduction is then claimed) will effectively reduce the flow into this environment. This will obviously result in an increase in tax revenue for the Government as more money will remain in the personal tax system.
Is this likely to achieve the desired effect? Australian's will no doubt look to other strategies to help manage their personal tax liabilities. More importantly though, these changes have the potential to further damage people's perception of superannuation as an effective tool to save for and fund their future retirement.
The task of advising clients on using superannuation as an effective tool to save for and fund their retirement is already a tough one given the preservation issues and the complexity of superannuation itself. Demonstrating the clear benefits of superannuation will be made that much harder with any further changes made to the super environment given that many are still trying to understand the 'Simple Super' changes introduced in July 2007.
Superannuation may just be one of the Government's revenue saviours this year but what damage is this likely to cause those looking to save for their retirements over the longer term. Restrictive changes may be unwound in the future but the perception of superannuation as a legislatively unstable environment will only be strengthened adding to people’s scepticism when considering this as a suitable vehicle for their retirements.
|
