Published in Herald Sun, November 2009 by Karina Barrymore
Workers are likely to desert the voluntary superannuation system as the industry braces for another round of rule changes, according to commentators.
Confidence in super is already stretched from years of tinkering and constant changes.
Comments this week by Federal Treasurer Wayne Swan flagged yet another shake-up, including taxing super at a higher rate for some savers.
Advisers said yesterday that people are widely expected to stop their voluntary contributions until they know what the next round of changes will bring.
"When the government starts making comments like this it impacts on the behaviour of a lot of people," superannuation lawyer Bryce Figot from DBA Lawyers said yesterday.
"It's only a bit over two years since the last major changes and now we have these rumblings of more changes. It makes people less willing to put money in to super.
"I think most people will wait until the end of this financial year, until after the release of the Henry tax review, before making any more contributions," Mr Figot said.
Wealth Within founder Dale Gilham said the government was preparing for another round of tinkering. "It diminishes confidence every time," Mr Gilham said yesterday.
"I can't tell you the amount of mums and dads who tell me they have no confidence in superannuation. One, they are very unhappy with the providers and their ability to deliver good returns and, two, governments appear to have this inability to stop fiddling," he said.
"It means people have no certainty. Certainty is what they really want. They want to know that if they put in X amount of dollars in to their super then they are going to be able to get that amount out at the other end.
"People are definitely pulling back on the amount they are putting in, absolutely. It makes sense. I'd rather have my money outside super where mere are more options to invest than in super, where you can't get at it and you don't know what the rules will be when you finally can get at it," he said.
"Do your normal compulsory contributions but sit and wait a little bit before putting in any extra."
Treasurer Wayne Swan flagged changes to the concessional tax rate on superannuation at a business conference on Thursday.
The changes, which are expected to include a tax increase on super contributions by high income earners, are part of a review of the tax system by Treasury Secretary Ken Henry. The review is expected to report to the government next month.
Submissions to the Henry tax review by the super industry have centred on a rebate or reduction in the current 15 per cent tax on super for low income earners, not an increase for high income earners as indicated by Mr Swan. Australian Institute of Superannuation Trustees said the last changes in 2006 heavily favoured high income earners.
AIST chief executive Fiona Reynolds said while those changes made super tax-free after age 60, the majority of Australians never paid tax on their super withdrawals because their balances were too low.
Before the last changes tax was only payable on super above $140,000 but the average balance is only $80,000, Ms Reynolds said.
Super lobby group ASFA chief executive Pauline Vamos yesterday warned the government against a "blunt" approach to any reform.
"It is important that Australians of all income levels receive tax concessions on their compulsory superannuation contributions, to compensate them for the fact that the money is preserved until retirement," Ms Vamos said.
"We firmly believe that Australians who can afford to make additional contributions to their super should receive incentives to do so. The incentives at the very top end of the income scale are too generous but it is important that the government and treasury do not take a blunt approach to a change to the contributions tax system.
"The industry saw a range of unintended consequences from the introduction in the May Budget of tighter limits on super contributions," she said.
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