FURTHER cuts to superannuation tax concessions, an increase in the retirement age and tightening access to the age pension may all be on the agenda following the release of the Australia's Future Tax System Review Panel's report into the retirement income system.
The review, released with the budget, signals the likelihood of big changes to super, including raising to 67 the age at which people can access their super savings.
Along with the announced increase in the age pension age, pension incomes and assets means tests would be replaced with a broader income test that deems income to be earned on a wider range of assets, Generous salary sacrifice concessions would also be limited.
Controversially, the review also rejects calls for compulsory super contributions to be lifted from the current level of 9 per cent. It says the current rate is adequate when coupled with the age pension. It said retirement savings would also be higher if the Government increased the age at which super could be accessed.
The review said the panel would also examine whether individuals should be required to devote part of their super to purchasing an income stream in retirement, or a deferred income stream to support them in their old age.
While the Government is still to deliver a full response to the review, it has already moved to cut the tax concessions on super contributions. As predicted, it has reduced the limits on tax-deductible contributions for higher income earners, but lower- to middle-income earners have also lost out through a temporary reduction in the popular super co-contribution.
From July 1, tax-deductible super contributions, such as those made by the self-employed or by employees through salary sacrifice arrangements, will be halved to $50,000 for those aged 50 or more and $25,000 for younger workers.
The Government will also cut its co-contribution from the current level of $1.50 for every $1 invested by lower and middle earners up to a maximum co-contribution of $1500, to $1 per dollar contributed, or a maximum of $1000. This was described as a temporary measure for the next three years, after which the co-contribution will be lifted to $1.25 in 2012-13 and 2013-14 before returning to $1.50 in 2014-15.
Other measures include extending the drawdown relief for retirees with pension products for a further year so they are not forced to sell investments at a loss during the downturn, and extending capital gains tax relief for super fund mergers.
In February, the Government announced a halving of the minimum annual payment retirees were required to withdraw from their pensions. This will be extended for 2009-10.
Despite widespread rumours, the budget did not contain a crackdown on the popular transition to retirement strategy where employees start a pension at age 55 and sacrifice their salary into super.
SUPERANNUATION
ANNETTE SAMPSON
PCo-contribution for low- to middle-income earners cut
PTax breaks for higher
earners halved
PReview recommends access to super be lifted to people aged 67
