AUSTRALIA - The Association of Superannuation Funds Australia (ASFA) has released a submission paper ahead of the 2005-2006 Budget recommending sweeping superannuation reform.
ASFA hopes the Federal government will implement its proposals – mainly aimed at addressing adequacy of retirement savings and so-called equity issues regarding income – in its forthcoming Budget.
ASFA recommends that from 2005-06 onwards:
1. The parameters of the super co-contribution be extended to individuals on low/middle incomes of up to AUS$60,000 per year, and that the phase-out rate for the co-contribution be adjusted to provide greater incentive for middle income earners.
2. Once an individual reaches their qualifying age for the Age Pension, they be entitled to apply to the Australian Taxation Office (ATO) for a refund of the surcharge payments made in their regard if their total super benefit is less than the tax free threshold (currently AUS$123,808) or for a 50% refund of surcharge payments if their benefit falls between the tax free threshold and AUS$200,000.
3. The AUS$450 a month earnings threshold for Superannuation Guarantee payments be abolished.
4. That AUS$70m be allocated to a comprehensive public education campaign conducted by either ATO or ASIC over three years to promote savings issues and educate fund members about super choice.
“The current co-contribution mainly benefits low-income earners, while the surcharge reduction currently being phased in will benefit upper income earners,” ASFA said in its submission paper. “There is both need and scope to provide greater assistance to individuals with a taxable income between AUS$40,000 and AUS$60,000 a year.
ASFA suggests the maximum co-contribution remain at AUS$1500, but this be available for people with assessable income and reportable fringe benefits of less than AUS$40,000 a year, rather than the current AUS$28,000 cap. It also recommends the maximum co-contribution phase down with increasing income, at a rate of 7.5 cents in the dollar, as opposed to 5.
The government co-contribution matches the personal contribution of the super fund member on a AUS$1.5 for each dollar contributed by the member basis.
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