Instigating tax reform, particularly of the retirement income system, when there is a significant budget deficit is “very, very difficult”, said Mr Sherry at a conference hosted by The Tax Institute in Sydney yesterday.
“I’d say to you very bluntly that tax reform, with all the policy and political debate, is extraordinarily challenging in any country,” he said.
“A number of people could sit down and design the perfectly sustainable system that exists, but no government would offer it because they would never get elected,” he said.
“I think inevitably we are stuck with complexity,” he added.
However, Mr Sherry believes there are still policy options that both sides of politics would likely consider implementing.
The introduction of a total lifetime cap on superannuation contributions, in addition to an annual cap, is a distinct possibility, Mr Sherry suggested.
Increasing the access age for superannuation could also be considered.
“I am sure the current Liberal government, who said no changes to super taxes, would be looking at this one. If you increase the super access age, and place it towards or the same as the pension age, you do save on your tax treatment,” Mr Sherry said.
Tax-free super at age 60 will eventually be ruled out, he believes, noting “I just do not see how, long term, it’s going to survive.
“We have budget deficits that are significant, the remorseless pressure of ageing and longevity, which has been well known by both sides of politics for a long time, and all the other competing budget pressures,” Mr Sherry said.
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