In a pre-budget submission, Pitcher Partners said that numerous changes have been made to the superannuation system over the last number of years which have had the effect of “significantly reducing the attractiveness of using the superannuation system to fund retirement”.
“The changes have gone too far and now there are no incentives left in the system to attract taxpayers to save above the compulsory contribution rate,” the submission stated.
“Some of these policies include the reduced deductible contribution cap of $25,000 per year, the $1.6 million pension cap and the 30 per cent contribution tax rate applicable to individuals deriving more than $250,000 per annum.
“We are concerned that the outcome of these significant policy changes, which collectively eliminate most of the voluntary savings incentives from the super system, will be to discourage retirement savings from those taxpayers with the capacity to save. Over time, we believe that this will create a new class of taxpayer with insufficient savings to self-fund their retirement who will qualify for, and need to rely on, the age pension.”
The submission said that the government should therefore consider reintroducing voluntary savings incentives back into the system as well as encouraging middle-income earners to use those incentives to self-fund their retirement.
One of the policies it could implement, the submission said, is increasing the deductible contribution cap from $25,000 to $50,000.
The submission also recommended introducing pooled thresholds and limits for super within families.
For example, this could mean allowing couples to pool their pension cap and contribution limit and use the combined threshold or limit in any way they chose.
Some of the thresholds and limits where this could apply, it explained, are the total superannuation balance threshold, particularly where non-concessional contributions are limited for one partner, the transfer balance cap amount and the threshold for the 30 per cent contributions tax rate.
“We would [also] support a holistic review of the superannuation system to better align the system’s objectives with the goal of accumulating wealth for retirement, reintroducing voluntary saving incentives and reducing system complexity,” the submission stated.