AFTER housing, superannuation is the biggest asset most Australians will ever own. But, unlike the family home, which is generally tax free, super is taxed three times.
AFTER housing, superannuation is the biggest asset most Australians will ever own. But, unlike the family home, which is generally tax free, super is taxed three times.
Contributions are taxed on the way in, earnings are taxed while your money is in there, and the end benefits are taxed when you receive them. This situation of triple-taxation is unique to Australia.
Given an ageing population and shrinking workforce, there have been many calls for reform of Australia’s super system. A move to taxing only end benefits is often cited as a preferred solution. This would result in an improvement in equity and reduction in the complexity of the system.
Senator Helen Coonan, Minister for Revenue and Assistant Treasurer, has responsibility for tax policy and administration in relation to super. According to Senator Coonan, one of the most immediate priorities is to design and implement the initiatives outlined by the Government during its election campaign.
One of these changes would allow couples to split their super contributions. Under the proposal, contributions could be made by one spouse into their spouse’s account. The net effect is a reduction in the couple’s taxation by way of access to two tax-free thresholds and two reasonable benefit limits. This change is planned for July 1 2003.
According to Senator Coonan, choice of fund legislation is still on the agenda, despite the previous Bill being rejected by the Democrats. The legislation may be brought before Parliament as early as May, and would give workers the right to decide which fund their superannuation benefits are paid into.
July 1 2002 marks the 10th anniversary of Australia’s intro-duction of compulsory superannuation support. Under this system, employers are required to give a minimum prescribed level of super support to their employees. On July 1 this year the contribution rate will increase to 9 per cent from the current 8 per cent.
The Government also will reduce the super surcharge from 15 per cent to 10.5 per cent over the next three years. The first reduction, 1.5 per cent, will take place on July 1 this year.
In addition to these changes, a debate over the safety of superannuation is currently under way. Don Mercer, former chief executive of ANZ bank, is heading the Superannuation Working Group, which released draft recommendations in March. These include a universal licensing regime for all super funds, prudential standards-making power for the Australian Prudential Regulation Authority, and a requirement for super funds to hold annual general meetings.
According to Philippa Smith, chief executive officer of the Association of Superannuation Funds of Australia, the outcome of the safety of super debate and the resultant regulatory framework adopted are likely to determine the future shape of the superannuation industry.
A Senate Committee is also currently looking into superannuation. Chaired by Senator John Watson from Tasmania, the Superannuation Select Committee is conducting an inquiry into the adequacy of the tax arrangements for superannuation.
According to Senator Watson, the inquiry will focus on “just how adequate the accumulated superannuation savings of an individual will prove to be, given the current taxation treatment they receive”.
The Senate Committee is currently calling for submissions. It plans to hold public hearings on the issues, and will report to the Senate on September 28 this year.
p Meanwhile, the Australian Institute of Company Directors has urged the Federal Government to: reform the superannuation regime to remove impediments for Australians to save; define the role of Inspector General of Taxation; move on its promised review of our international tax system; and eliminate the 3 per cent tariff on business inputs and the 5 per cent general tariff, when drawing the Federal Budget for next month.
The institute’s CEO, John Hall, maintains that Australia’s superannuation and international tax regimes are too complex, and has called on the Government to focus on reducing their complexity.
“We are the only country taxing superannuation three times and Australians are discouraged from placing more savings into superannuation because of the overall complexity of the regime,” he said.
“The current system fails to address the serious long-term savings dilemma that exists in Australia.”
Contributions are taxed on the way in, earnings are taxed while your money is in there, and the end benefits are taxed when you receive them. This situation of triple-taxation is unique to Australia.
Given an ageing population and shrinking workforce, there have been many calls for reform of Australia’s super system. A move to taxing only end benefits is often cited as a preferred solution. This would result in an improvement in equity and reduction in the complexity of the system.
Senator Helen Coonan, Minister for Revenue and Assistant Treasurer, has responsibility for tax policy and administration in relation to super. According to Senator Coonan, one of the most immediate priorities is to design and implement the initiatives outlined by the Government during its election campaign.
One of these changes would allow couples to split their super contributions. Under the proposal, contributions could be made by one spouse into their spouse’s account. The net effect is a reduction in the couple’s taxation by way of access to two tax-free thresholds and two reasonable benefit limits. This change is planned for July 1 2003.
According to Senator Coonan, choice of fund legislation is still on the agenda, despite the previous Bill being rejected by the Democrats. The legislation may be brought before Parliament as early as May, and would give workers the right to decide which fund their superannuation benefits are paid into.
July 1 2002 marks the 10th anniversary of Australia’s intro-duction of compulsory superannuation support. Under this system, employers are required to give a minimum prescribed level of super support to their employees. On July 1 this year the contribution rate will increase to 9 per cent from the current 8 per cent.
The Government also will reduce the super surcharge from 15 per cent to 10.5 per cent over the next three years. The first reduction, 1.5 per cent, will take place on July 1 this year.
In addition to these changes, a debate over the safety of superannuation is currently under way. Don Mercer, former chief executive of ANZ bank, is heading the Superannuation Working Group, which released draft recommendations in March. These include a universal licensing regime for all super funds, prudential standards-making power for the Australian Prudential Regulation Authority, and a requirement for super funds to hold annual general meetings.
According to Philippa Smith, chief executive officer of the Association of Superannuation Funds of Australia, the outcome of the safety of super debate and the resultant regulatory framework adopted are likely to determine the future shape of the superannuation industry.
A Senate Committee is also currently looking into superannuation. Chaired by Senator John Watson from Tasmania, the Superannuation Select Committee is conducting an inquiry into the adequacy of the tax arrangements for superannuation.
According to Senator Watson, the inquiry will focus on “just how adequate the accumulated superannuation savings of an individual will prove to be, given the current taxation treatment they receive”.
The Senate Committee is currently calling for submissions. It plans to hold public hearings on the issues, and will report to the Senate on September 28 this year.
p Meanwhile, the Australian Institute of Company Directors has urged the Federal Government to: reform the superannuation regime to remove impediments for Australians to save; define the role of Inspector General of Taxation; move on its promised review of our international tax system; and eliminate the 3 per cent tariff on business inputs and the 5 per cent general tariff, when drawing the Federal Budget for next month.
The institute’s CEO, John Hall, maintains that Australia’s superannuation and international tax regimes are too complex, and has called on the Government to focus on reducing their complexity.
“We are the only country taxing superannuation three times and Australians are discouraged from placing more savings into superannuation because of the overall complexity of the regime,” he said.
“The current system fails to address the serious long-term savings dilemma that exists in Australia.”
