Holistic view needed on super tax concessions

The Government needs to take a holistic view of Australia's retirement incomes system including superannuation and the age pension before it makes any decisions about the tax concessions granted to super, according to Institute of Chartered Accountants (ICAA) superannuation specialist, Liz Westover.

Discussing the current debate over the cost of tax concessions to superannuation on the ICAA's discussion forum, Westover acknowledged the value of the current regime to high income earners.

"On the face of it, it is hard to reconcile why high income earners with substantial super balances need to be further incentivised (through tax concessions) to contribute more to their super balances when they clearly have sufficient savings for a comfortable retirement," she wrote. "However, I don't think the solution is to simply deny these people further concessions. There are a number of factors that need to be considered in the debate."

Westover said that among the issues that needed to be considered were that an individual's super balance might actually be the retirement savings for others including spouses with little super savings.

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"It may also include a need to support disabled children or grandchildren," she said.

Westover questioned whether, under a compulsory system of super contributions, it was reasonable to force people to lock their money away for no ‘compensation'.

"How do we determine what the cut off level is for high balances? Are we making assumptions (potentially wrong ones) about what a sufficient savings level is, which could vary greatly depending on individual circumstances?"

Westover said that balances could fluctuate wildly over the long-term and that the global financial crisis had served to reinforce this point.

"Before any decisions are made about the tax concessions in super, it will be vitally important to take a holistic review of our retirement incomes system which includes super and the aged pension," she said. "If we don't first decide what we want from the system in the long term, then any changes are simply more tinkering."

"Changes must be made, not simply to balance the public books, but to ensure we have a sustainable retirement income system that facilitates everyone attaining a comfortable retirement."