Lift tax-free threshold to 65: ASFA

The age at which superannuation becomes tax-free should be increased gradually to 65, according to the Association of Superannuation Funds of Australia (ASFA).

ASFA has used its submission to the Henry Retirement Income Consultation Paper to argue that while there is merit in the concept of introducing a tax on investment earnings in retirement, it believes it is appropriate at this stage to leave investment returns in retirement tax free.

The submission said ASFA was recommending that the age at which superannuation became tax free should be increased gradually to age 65.

It said this would be consistent with the age ASFA had recommended for preservation and the eligibility age for the age pension.

However, it said consideration would need to be given to those aged less than 65 who could not work and might therefore need to access their superannuation beyond the existing tax-free amount available.

At the same time, the ASFA submission recommended improving the equity of superannuation tax for low and middle income earners by rebating via the co-contribution regime the 15 per cent contributions tax on superannuation guarantee payments and any other pre-tax contributions for low income earners.

As well, it recommended expanding the co-contributions regime to middle income earners via a possible increase in the lower co-contribution limit from $30,342 to a higher income such as $50,000, so that it phases out at $80,000.