The recently announced retirement income review needs to examine if tax concessions given for superannuation are being used to strengthen retirement income streams or to fund lump sums that pay down debts after age 65.
Heffron director Martin Heffron told selfmanagedsuper that clarifying where tax concessions were going and how they were being used inside the superannuation system was important if its purpose was to enable an adequate retirement for all Australians.
“It would be good if the review announced by the federal government could find what happens when people reach retirement age and if they use their superannuation to pay off their mortgage. If so, then the tax concessions for superannuation are really tax concessions for housing,” Heffron said.
He noted a large percentage of pension assets are currently held inside SMSFs, but in comparison many industry funds have smaller balances at retirement age that are taken as lump sums.
“Are these being taken as those sums and then placed into pensions? We need to find out and ask if we are wasting the concessions if they are not being used for the purpose they were given,” he said.
He said this issue was also related to calls to raise the superannuation guarantee (SG) from its current level of 9.25 per cent, which have been criticised as taking wages from workers, as well as being praised as a boost to the economy.
“If we are just moving tax concessions from the wages system to the housing market, why would we bother with thinking about changing the SG rate?” he said.
“If we are using wealth at the end of our working lives to fund retirement, then increasing the SG is not an unreasonable idea.”
When the review was announced, He noted it would be able to look into a range of issues, including the tax treatment of property in retirement and how that was shaping the cost of housing for retirees, as well as the wider population.