2016 Budget Superannuation reforms
19 December 2016, by Emily Millane
This post was originally published as part of the Tax and Transfer Policy Institute Policy Brief series.
After some years of stasis, superannuation tax reform was back on the agenda in 2016. Not since the Howard-Costello changes in the 2006- 07 Budget has there been such a substantial amount of superannuation reform. However, the 2016 changes go in the opposite direction of the Howard-Costello reforms by tightening tax concessions received by those on highest incomes.
For a weighty and complex package of legislative changes, the reforms result in minimal savings – approximately $3 billion over the forward estimates – while doing little to address underlying inequities in the system. As the Government itself notes, 96 per cent of individuals in the superannuation system will be unaffected or be better off as a result of the package. This gives some indication of the very modest changes introduced.
The new objective of superannuation is to, ‘provide income in retirement to substitute or supplement the Age Pension.’ This purpose does not attempt to address the broader question of what standard of living Australia’s retirement income system provides, a point which has been debated among superannuation industry representatives.
The current system: overview
Retirement savings may be taxed at different points in time: when a person contributes; on the income from those earnings in the fund; and when funds are withdrawn. Australia’s superannuation tax system is what is known as a ‘Tax-Tax-Exempt’ (TTE) system, which is unchanged by the 2016 reforms.
Under Australia’s TTE system, tax of 15 per cent is levied on most contributions to superannuation funds and on income earned in the fund. Generally speaking, withdrawals of superannuation are completely tax exempt, following the Howard-Costello changes of a decade ago.
Read the full article at Austaxpolicy blog.