Money
Issue No. 18 - August/September 2004
New Outlook for Superannuation
by Tony Catt
Members of public-offer and self-managed superannuation funds will undoubtedly consider the latest superannuation policy of the Government and Labor on two levels: the significance for Australia’s retirement savings and the practical meaning for their personal savings strategies.
On a broad scale, the policies may be seen as useful responses to this country’s rapidly aging population and inadequate retirement savings. However, the superannuation industry has been quick to claim that neither the Coalition nor Labor is moving quickly enough given the urgency of the issue.
The growth of superannuation savings continues to be hampered by the combined taxes on contributions, annual earnings and superannuation payouts upon retirement. (Before the budget, the top surcharge rate on contributions for higher-income earners was being reduced progressively over three years to 12.5 per cent. In the budget, however, the Government has proposed to further reduce the top surcharge rate progressively in annual steps to reach 7.5 per cent from 2006/07.) Another factor that discourages voluntary contributions into superannuation is the sheer complexity of the superannuation system.
In the budget, the Government increased its annual co-contribution from $1,000 to $1,500 to match a $1,000 personal, undeducted contribution by an eligible fund member, This will come into force from July 2004. The Government also announced in the budget various superannuation ‘integrity’ measures that should be understood by members of self-managed funds. See page six of Your Wealth for an outline of selected budget measures.
The general thrust of the Government’s policy is to broaden superannuation membership and encourage older fund members to remain at work longer. The Coalition proposal allows people outside the workforce and under age 65 to make superannuation contributions for the first time. They further propose easing of minimum work requirements for th...
