written by Robert Deutsch CTA *
At its most fundamental, superannuation is all about money being set aside throughout one’s working life so as to provide an adequate level of funding for one’s retirement. For many Australians, the superannuation nest egg is usually the second largest asset they will ever hold — the largest being the family home.
One would have thought that the idea that a fund could be set aside for each and every Australian to provide for their retirement funding would not be a complicated process and would not lead to convoluted legislation. How wrong one can be!
A key objective of a tax system is simplicity and yet, in the context of superannuation, we are as far away from that objective as ever.
In my opinion, our political masters, both past and present, should hang their collective heads in shame at the appalling state in which we now find superannuation. For the average person, the concepts that underpin superannuation are complex, abstract and basically beyond understanding.
It is no answer to say that you shouldn’t worry about all that because, for most of you, none of it matters. The noise that emanates from the media regarding concepts such as the $1.6m cap (times two), concessional and non-concessional contributions, limited recourse borrowing arrangements, commutable and non-commutable pensions and the like generally scares the average punter into thinking that superannuation is not for them.
However, nothing could be further from the truth and the reality is that it is quite absurd how little attention is paid by the average Australian to their superannuation. Every Australian needs to make the time and the effort to look after what could and should be their second largest asset.
How could this be fixed?
We need to focus our attention on what is important in the context of superannuation and this calls for a system with some basic simple underpinnings, as follows:
If we stick to these principles, we get a simple outcome for all: 15% on the way in, 15% on the way around, and 0% on the way out. And it could all be done within the parameters of a legislative framework that is simple, concise and readily understandable.
* Robert Deutsch is The Tax Institute’s Senior Tax Counsel. This article was first published in the February 2018 issue of the Institute’s member-only journal, Taxation in Australia.