AUSTRALIA - The Australian worker on an average income could be nearly AUD$40,000 ($21,014) better off in retirement savings if the government's superannuation contribution tax was abolished, the Institute of Chartered Accountants (ICAA) in Australia said. "If the government or opposition are serious in their pre-election promises about reducing taxation, and planning for Australia's ageing population, abolishing superannuation contribution tax would be the most effective way to assist the majority of Australians, both now and in the future," said Stephen Harrison, CEO of the ICAA. Superannuation contributions tax, currently 15%, is calculated as a percentage of the superannuation contribution. According to the ICAA, abolishing this tax would mean that the Australian worker, on the average income of $42,100 a year would receive $264,324 in 20 years time (assuming an average annual after tax growth rate of 5%), as opposed to $224,675.
Harrison added: “The government is sending conflicting messages - on the one hand, they tell us that Australians should be putting the maximum amount into superannuation, because of the rapidly increasing cost of providing social security for Australia's ageing population. But on the other hand, they persist with a tax on contributions, which acts as a significant disincentive to saving and diminishes the funds available on retirement to those Australians that have done the right thing.” He concluded that taxation of Australian superannuation contributions is one of the steepest in the world: “Apart from superannuation contributions tax, there is a 15% tax on earnings and another 15% tax payable on exit payments of more than $105,842.” By Janet Du Chenne
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