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Progressive approach key to equalising super

The substantial variation in outcomes for individuals in different parts of the super system requires government and industry to adopt much more progressive thinking, according to a university professor.

“I think the thing that is most distinctive about the system now after 20 years is that there is a huge variation in the outcomes for individuals,” Monash University finance professor Deborah Ralston told the SMSF Association 2016 National Conference in Adelaide on Friday.

“There’s a huge variation between the average balances in SMSFs, the average balances in institutional funds and there’s 15 per cent of people in the economy who have no super.

“So my thinking would be that we really need to spread that more evenly across the board and to do that we need to look at how we make [the system and taxing] a little more progressive and to really look at the coverage.”

The other area exhibiting significant super imbalances was with women, Ralston said.

“Although interestingly, some of our Monash/CSIRO research has just done an examination of different cohorts of women coming through and that disparity is nowhere near as marked in younger generations,” she said.

“I like the idea of more flexible concessional caps to allow people who have been out of the workforce to catch up and I’d really like to see us have a look again about including more people who are currently not in the system.”

Furthermore, she said she was divided about when the system should be applying tax to superannuation.

“We’ve got a bit of a weird taxing situation now,” she said.

“Ideally, and in many countries around the world, it’s about minimising tax on the input to encourage people to invest, minimising tax on the way through because you don’t want to stop the cumulative effect of maximising balances, and then tax on the way out, which is by far the more normal way to do things.

“Having said that, that’s not where we’re starting from so we have to work with what we’ve got.”

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