Given the deepening market crisis, no-one expects any superannuation benefits to be announced in this year's federal budget. However, there is growing speculation super concessions are in for an overhaul as the government tries to grapple with a growing deficit.
Few in the industry ever questioned the sustainability of the Howard government's simple super initiatives. Announced in 2006, the measures were widely welcomed. The generous tax concessions effectively pushed superannuation as one of the most important (and tax-effective) assets for Australians.
These super tax concessions, however, are one of the fast-growing areas of total government spending, according to recent research from the Australia Institute.
The think tank found the super tax concessions would cost the budget $24.6 billion in 2008/09, rivalling the $26.7 billion annual cost of the age pension and constituting about a fifth of income tax revenue ($130 billion a year).
Industry groups are also questioning the super tax concessions.
CPA Australia and the Association of Superannuation Funds of Australia found the policy changes overwhelmingly benefited higher income households.
In its submission to the Henry tax review, the Australian Institute of Superannuation Trustees (AIST) noted it was unclear whether the measures that made super tax free for those over 60 were equitable or fiscally sustainable in the long run.
In fact, at this year's Conference of Major Superannuation Funds, AIST chief Fiona Reynolds said the budget could abolish some of the tax concessions.
As former prime minister Paul Keating said in an Investor Weekly interview, Australia's compulsory system was created so everyone, including "the bloke running after the garbage truck", had access to super.
The crisis could also provide the government with the opportunity to weed out the current inequity in the system and perhaps direct any savings to middle and lower-income earners. Let's hope these measures will be sustainable.
