Prescriptions for reform of Australia's superannuation tax concessions

The highly controversial and often politicised issue of Australia’s retirement savings regime featured prominently throughout the two day Federal Government’s October 2011 Tax Forum. Calls for reform of this regime are by no means new. Reform debate over the years has focused on each of the three separate pillars: the age pension, compulsory superannuation, and voluntary saving, as well as the interaction of those three elements. However, recently there has been a significant shift away from reliance on the age pension, with its associated risks falling to the government, to a defined contributions scheme where the associated risks fall to the individual taxpayer. Consequently, Australia’s superannuation regime is predominantly subject to current debate, and, as such, the subject of this article. This article considers the history of Australia’s retirement savings regime, along with a framework for evaluating the superannuation tax concessions. It then discusses the recommendations of the Australian Future Tax System (AFTS) Review Panel and ensuing debate at the Tax Forum. Finally, it suggests two proposals to achieve the objectives of the AFTS Review in relation to retirement, those objectives being a system which is broad and adequate, acceptable to individuals, robust, simple and approachable, and finally sustainable. The first, whilst potentially requiring some tinkering’, is relatively simple and a blue print has already been provided to the Federal Government – the adoption of Recommendations 18 and 19 of the AFTS Review. The second is one of management. Superannuation concessions are fundamentally categorised as tax expenditures and the management of these tax expenditures, not just the reporting, should be undertaken.