The Turnbull government must announce any changes to the taxation of superannuation as quickly as possible in order to maintain confidence in the system, says Towers Watson.
Towers Watson managing director Andrew Boal there has been considerable discussion around the taxation treatment of superannuation and while these discussions continue, the average Australian superannuant is losing confidence in the system.
“Future change is inevitable, so I think the sooner we reach an agreement around what is an equitable and sustainable tax system for superannuation, the better,” said Mr Boal.
“I don’t think we’ll achieve that next year, but the discussion should at least go a lot further in 2016 in terms of identifying what we’re trying to do.”
Despite a bipartisan agreement on establishing the objectives of the superannuation system, there is still disagreement on what exactly the purpose of super is.
“The reason why it’s important to have an objective for the superannuation system is that when you start looking at all the other settings – such as tax, its sustainability and equity – those settings need to be influenced by what you’re trying to achieve and what the objective is,” he explained.
“From my perspective, the objective should be for most Australians to use their superannuation to draw down an income stream to produce good income in retirement. Now, defining what is 'good income' is something that needs to be discussed.”
The objective of superannuation should at least be clearly articulated as “not being the accumulation of wealth or a lump sum, but ... the accumulation of an asset which is used to draw an income in the retirement period”, Mr Boal said.
He added that he did not believe the superannuation system was ever intended to replace the age pension.
“I think it was always intended to supplement the age pension,” he said.
“As evidence of that, the numbers we’ve run on this show that, at the moment, about 80 per cent of retirees at least access a part age pension and even as the superannuation system matures over the next 30 years, that percentage will only fall to around 75 per cent.”