Australian Council of Social Service chief executive Cassandra Goldie
Source:Theage
Retirees could face a 15 per cent tax on superannuation earnings to help fund aged-care services under a federal budget proposal from the Australian Council of Social Service, while the long-term unemployed would be put into training or subsidised work experience.
The social services lobby group is recommending a staggered reintroduction of the superannuation tax over the next three years to bring $2.5 billion worth of revenue into federal government coffers in 2022-2023. This money would be used to fund affordable aged-care services.
Also on the list of proposals is a $370-a-fortnight increase in the base rate of JobSeeker, retaining wage subsidy scheme JobKeeper for affected industries, and government-subsidised work experience and training for those out of work for a long period.
The future of the nation’s superannuation system has become a hot-button issue ahead of the federal budget amid debate about the currently legislated rise of the super guarantee from 9.5 per cent to 12 per cent. There is a growing push from a group of Coalition backbenchers to stop the increase and instead allow first-home buyers to dip into their retirement savings. The federal government is also facing pressure to improve the social safety net after the Reserve Bank governor Philip Lowe last week said the dole should be increased on the basis of “fairness”.
ACOSS chief executive Cassandra Goldie said it was not widely understood that a superannuation fund’s investment income was not taxed once a fund member reached preservation age, while during working years all interest and dividends in super are taxed at 15 per cent and capital gains are taxed at 10 per cent.
“Only 16 per cent of those over 64 are contributing through the income tax system,” Ms Goldie said. “Super [tax breaks] are for those with significant wealth … disproportionately benefiting those on high incomes.
The 80-page budget priorities submission says current tax concessions cost $42 billion a year, which is almost the cost of the Age Pension, and warns this is “not sustainable if future governments are to guarantee decent health and aged care services for an ageing population”. A 15 per cent rebate, minus imputation credits, is also recommended by the group for retirees whose income is lower than the tax-free threshold.
“It’s a modest proposal … the support [for the tax] should come from the fact this is an important way to finance the aged-care system,” Ms Goldie said.
The submission further backed the rise of the superannuation guarantee by the first 0.5 percentage points, to 10 per cent of wages, which is due this year. But it said the rate should be kept at this level “unless it is demonstrated that higher contributions would benefit people on low and modest incomes”. The federal government has been considering a range of options for the future of the super guarantee, including a possible “opt in” component, with a growing group of backbenchers opposing the currently legislated increase in the mandatory superannuation payments to 12 per cent by 2025.
However, Labor, the unions and the super funds are concerned workers won’t have enough for retirement without the increase and have been alarmed by significant withdrawals from superannuation accounts to get through the pandemic.
Data from the Australian Prudential Regulation Authority released on Monday shows the COVID-19 early access scheme, which allowed struggling workers to withdraw up to $20,000 from their super, prompted 3.5 million people to apply for funds to be released at least once. Payouts over the scheme totalled $36.4 billion.
Up to 725,000 people withdrew all or the majority of their superannuation balances during the pandemic. Industry Super Australia chief executive Bernie Dean said those who tapped into their retirement savings did so believing the superannuation guarantee would rise to 12 per cent. “It is vital the super rate goes up to 12 per cent to help them make back what they have lost,” Mr Dean said.
Another $500 million was withdrawn from super in 2019-2020 on compassionate grounds to cover procedures including IVF, weight loss surgery and dentistry for about 34,000 people.
“This is shocking to some but not to us,” Ms Goldie said.
ACOSS’ submission asks for a transition to a federally funded universal dental treatment scheme at a cost of $1.1 billion. “We should be alarmed by how rapidly people drew down on their often very modest super funds to cover these kinds of essential costs, which weren’t associated with the pandemic at all.“
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said accessing super early “reduces the ability to save for retirement” and is tightly controlled to ensure savings are preserved for retirement. “The super industry recognises that there are limited circumstances were accessing super early is appropriate,” Ms Scheerlinck said.
Australian Super Funds Association chief executive Martin Fahy said early access to funds would “have the effect of reducing the amount available in retirement, which is likely to increase the reliance on the age pension in future” but in some cases it was justified, such as to assist victims of domestic violence.
Labor superannuation spokesman Stephen Jones said it was “not a low bar” to access super on compassionate grounds and instead suggested the safety nets were not generous enough to help those struggling. “A lot of people really are doing it tough. Our concern is these last resort [measures] become first resort,” he said. “For too many Australians super is the only savings they’ve got … Government can’t shirk their responsibility by saying you should dip into your super.”
Financial Services Council chief executive Sally Loane said there would be circumstances when access to super now would be more beneficial than waiting until retirement, including in cases of severe and immediate hardship and preserving retirement balances. “[Accessing] superannuation early should be seen as a last resort, rather than replacing other forms of financial support,” Ms Loane said.
