Tax Break For Rich Worst Public Policy Since White Australia

Superannuation tax breaks for the rich is the ‘worst piece of public policy since white Australia’, Garry Weaven pioneer of industry funds said at Conexus Financial’s 18th annual Investment Administration Conference, held last week.

Addressing more than 200 superannuation professionals, Weaven said most countries view Australia’s system as close to perfection, but despite this significant changes needs to take place to make the system sustainable.

“The Peter Costello gift to the rich by entirely abolishing earnings tax for older people and by lifting the limits dramatically of what they can pump in [to superannuation], has generated massive amounts of concessionality that is devoted to the mega-rich in their later years,” Weaven said.

“It is probably the worst piece of public policy since the white Australia policy.”

Weaven said the continuing increase of average life expectancy is underpinned by a persons’ finances – their access to quality accommodation, health and aged care are all dependent on being able to afford them.

“It will be a tragedy if poor people die and rich go on living forever,” he said.

Ian Silk, chief executive of AustralianSuper agreed, and said superannuation was not designed for taxpayers to provide tax benefits to multi-millionaires.

“I would go with a more interventionist regulatory framework that might have, for example, limits on the taxation benefits that individuals can take out of the systems,” Silk said.

“I’ve seen reports of people with double-digit-million-dollar superannuation accounts, even triple-digit-million-dollar superannuation accounts. Put as much money in the system as you like, but don’t expect to get taxation benefits beyond a reasonable level.”

Silk said that a consensus needs to be reached on the purpose of superannuation as this will allow issues within the sector to be effectively addressed.

“The superannuation system is an arm of public policy, it is essentially a creature of two sets of parliamentary acts, concessionary tax savings vehicle and it’s compulsory, this infers on parliament the right to intrude,” he said.

Weaven, Silk and the chair of MLC’s superannuation funds’ trustee boards, Nicole Smith, are all supportive of the financial systems inquiry recommendation that superannuation should be defined as “providing income in retirement to substitute or supplement the age pension”.

“It may seem simple, but it is profound, if we start from that premise, some problems become easier to solve. I say this with hope of a bipartisan view,” Smith said.

Silk was also heartened to see the FSI recommend responsibility for products to be shared between designers and financial planners, saying in some past instances the designer’s poor product had “strapped a suicide bomb on financial planners”.

This news story is reprinted from www.professionalplanner.com.au

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