The Association of Financial Advisers (AFA) has called for an amnesty between both sides of politics on making changes to the taxation of superannuation in next month’s federal Budget.
The association said its members have reported a “significant increase in client concern” following widespread speculation in the media over possible changes to super tax structures in the May Budget.
A bi-partisan political agreement would help restore consumer faith in the country’s retirement system, the AFA stated.
“Our members indicate that the speculation is driving high levels of anxiety amongst those of their clients who are trying to fund their own retirement and avoid the need for future government handouts,” AFA president Michael Nowak said.
“Continuing speculation over the last few months and the recent ramp-up in media speculation about the issue are seriously dangerous for the superannuation system and this anxiety is impacting people at all income levels.”
The AFA called for a long-term, bi-partisan approach to ensure certainty around the future of superannuation. “That starts with not increasing the taxation of superannuation in the May Budget,” Mr Nowak said.
With an increase in contributions tax implemented in the 2012 Budget, there is a risk of creating a pattern of policy change that sends the wrong message to consumers, he said.
“Consumers are concerned there is a very real risk the threshold will be further reduced in coming years.” By further damaging consumer confidence, governments create the risk that people will become reluctant to make additional voluntary contributions, he added.
Referencing a February report from Mercer that benchmarked Australia’s retirement system against those of other nations, Mr Nowak rejected concerns raised recently about the sustainability of Australia’s superannuation system.
The Mercer report found Australia’s current tax concessions for super are modest compared with other countries with world-class retirement income systems, with the lowest concessional caps as a proportion of average income.
“It’s important to also remember that of the nine countries included in the research, Australia is the only country with a tax on contributions,” Mr Novak said.
At the time the Financial Services Council (FSC) also rejected concerns over the system’s sustainability. FSC chief executive John Brogden called for both sides of politics to “leave super alone”.
