Quality health and aged care services, affordable housing and an adequate income support system are vital to ensuring decent, secure retirements, says the to Treasury’s Retirement Incomes Review. It will not be possible for future governments to properly fund these essential services for an ageing population while the present, unaffordable tax breaks for superannuation investment income remain in place, without increasing already high out-of-pocket costs for these services.
The submission argues for the inequitable tax breaks for super contributions to be reformed before further increases to the superannuation guarantee are made.
ACOSS CEO Dr Cassandra Goldie said:
“While retirement incomes have improved since the rise in the age pension, many older people under the pension age are finding themselves out of paid work, often due to age discrimination. The fastest growing group of people on Newstart are those aged over 55, particularly women, and they are struggling to get by the on the paltry rate of $40 a day, which must be urgently increased.
“For decent, secure retirements, people need quality universal health and aged care services and secure and affordable housing. The Royal Commission into aged care has revealed serious failings, which have caused untold suffering. On top of the poor quality of services, due in large part to insufficient skilled staff with high turnover and long queues for at-home care; older people worry whether they can afford increasing out-of-pocket costs of health care and aged care including large lump-sum deposits.
“As our population ages, we must strengthen our aged care system by ensuring it is adequately funded and affordable. This will be hard to achieve as long as the present tax breaks for superannuation after retirement remain in place. Once people retire, the investment incomes of their super fund – such as interest and capital gains – is no longer taxed at all. ACOSS calls for savings from reform of this and other unaffordable tax breaks to be used to guarantee access to quality, affordable aged care for all who need it, without the high out-of-pocket costs that presently apply.
“With housing becoming more and more unaffordable, the proportion of older people renting or facing homelessness is expected to rise. As a first step to improve security and affordability of housing for people at risk of homelessness, we propose a 30% increase in Rent Assistance and a social housing investment package to build 20,000 homes over the next three years.
“Our submission responds to calls to increase the superannuation guarantee. We argue the guarantee should only be increased if a number of conditions are met, including that the tax treatment of superannuation contributions is reformed so that people on low wages receive at least the same tax support per dollar contributed as those on high incomes.
“The flat 15% tax on employer superannuation contributions means that a cleaner earning $20,000 receives no taxation support for compulsory employer contributions, yet a fund manager on $200,000 receives a tax break of 32 cents per dollar contributed.
“In the absence of fundamental reform of the tax concessions, further increases in compulsory super contributions would further entrench existing inequities, including the serious gender gap in retirement incomes. Increasing the super guarantee alone would be of doubtful benefit to lower income-earners who face greater financial pressure during working life, and are more likely to have already achieved income replacement in retirement at the present contribution level.
“Despite recent reforms, the superannuation system remains a generous wealth management system for people with high incomes, while people with lower incomes receive little or no benefit. This must change.”
