The independent review into the retirement income system will have more scope to evaluate current retirement income policies as it has been set the task of establishing facts rather than considering future changes, according to the director of an SMSF service provider.
Heffron director Martin Heffron told selfmanagedsuper the review announced earlier this week will be investigative instead of a consultative in its approach and while its content is restricted by the terms of reference, it was not restricted on what it could report.
“In this regard, the terms of reference are not constrained at all and it has been given the ability to critique the government and its current policies,” Heffron said.
He suggested the current policy of excluding the family home from the assets test was one of the policies that should be considered in the review claiming the cost to Treasury remains unknown at present.
“I hope the review finds out where the large costs are in the retirement income system and excluding the family home from the assets test has to be included in that consideration,” Heffron said.
“At present, we only have anecdotal data but we do have some of the highest property costs in the world as well as high levels of household debt associated with purchasing residential property.”
He noted the tax system treated residential property favourably in retirement and that, alongside the absence of a means test, there was no inheritance tax and capital gains tax could be passed through an estate.
“It is an onshore tax haven in which you can never really over-invest so I suspect it is a large cost to the retirement income system and it seems wrong to allocate retirement funding based on the nature of the assets held by a retiree,” Heffron said, adding that shares held by retirees did not receive the same tax treatment.
Further he called for the review to define the term “retirement income adequacy” given it was currently open for debate but shied away from setting any standard that did not consider basic living needs.
“The only objective measure that should be used around adequacy is will it provide for food, shelter and the basic needs of all retirees. The review should note where this benchmark sits and the government should then address this as a policy issue,” Heffron concluded.
