The former chair of the Commonwealth Superannuation Schemes, Peter Reynolds, has called for the government to adopt an asset-based dividend method to enhance all retirement balances and government revenue.
In a submission to the Retirement Income Review, Reynolds said upfront tax on super was crippling retirement income.
“The upfront tax limits the potential of the super scheme by reducing the superannuation guarantee (SG) to 8% of ordinary time earnings before investment (e.g. a $10,000 SG is reduced to $8,500). This configuration of taxes reduces the return to individuals and government,” he said.
Reynolds said a more effective system would be an annual asset-based fee or dividend of 1.25% on the super pool of funds in accumulation mode.
“This approach redistributes the tax burden from the earlier years of accumulation to the latter years. In so doing, it enables greater wealth to be created for all participants with the greatest benefit flowing to low income earners and those with low balances,” he said.
“The dividend method would increase and stabilise government revenue with a predictable compound growth rate of 7% per annum for the next 15 years.”
Reynolds noted it would also simplify the super scheme with government revenue requiring only one calculation per annum on the mandated 30 June balance of each super account.
Source: Peter Reynolds
The figures are based on an estimated current tax revenue of $30 billion. A dividend of 1.25% from an asset base of $2.4 trillion (accumulation mode) would yield the same amount.
Michael Lovett, who left the investment firm just three months after launching its Vanguard Super offering, has taken up a chief executive role at an Australian asset manager.
The Central Bank of Ireland has granted the approval of Equity Trustees’ exit from its Irish operations, with the transaction expected to be complete on 30 April.
Super returns continued to climb in March, raising hopes of delivering double-digit returns by June depending on the performance of this next quarter.
The dedicated super fund for emergency services and Victorian government employees is under fire for unpaid entitlements to transport employees, which could exceed $40 million.
Pardon my ignorance; more information please. Is it a Fee or Dividend …… and, there is still only 100 cents in the dollar. Very confusing.
Add new comment