Australia's Future Tax System

No. 2009/03
12 May 2009

Tax Review report on the retirement income system

The Government has today released the report prepared by the Australia’s Future Tax System Review Panel into the retirement income system. The report presents the Panel’s broad strategic views on the retirement income system.

The Panel’s key finding is that the three-pillar architecture of Australia’s retirement income system — consisting of the means tested Age Pension, compulsory saving through the superannuation guarantee and voluntary saving for retirement — should be retained. The retirement income system is facing increasing challenges as the 21st century unfolds which will test the sustainability, adequacy, acceptability and coherence of the system. The three‑pillar architecture is well suited for a balanced and flexible response to these challenges.

However, there is a need for some adaptive change to calibrate the three pillars so the system serves its purposes and retains its strengths.

The Panel recommends:

  • maintaining the superannuation guarantee at 9 per cent, not extending the superannuation guarantee to the self employed and retaining the $450 per month threshold;
  • gradually increasing the Age Pension age to 67 years;
  • gradually aligning the age at which people can access their superannuation savings (the preservation age) with the increased Age Pension age;
  • improving the fairness and coherence of the pension means tests, possibly through a single test, and improve incentives to work beyond retirement age;
  • reducing the complexities resulting from the interactions between the tax-transfer system and the aged care sector;
  • maintaining tax assistance to superannuation but improving the fairness of concessions for contributions, including by broadening access to them, and considering whether the current cap on concessions is appropriate;
  • improving the ability of people to use their superannuation to manage longevity risk; and
  • improving the awareness and engagement of individuals with the retirement income system.

The report was developed with the help of many people, in particular those who provided, at short notice, valuable submissions and those who participated in direct consultation with the Panel and the Secretariat. The public consultation meetings also offered valuable information on issues of concern to the community about the retirement income system. The Panel records here its gratitude to all who have worked so diligently on this task, or taken time out to attend consultation meetings.

A range of issues that were raised in these submissions and consultations, such as the age beyond which a person cannot make contributions, the taxation of benefits received by members of untaxed funds and the taxation of superannuation death benefits, are not expressly dealt with in the report. However, they will be taken into account in the Panel’s final report due in December 2009, as they may be affected by the Panel’s recommendations on the broader tax-transfer system.

More information

Please visit or call 1800 614 133 for copies of the papers and more information on the review.

Media contact: Tony Murray (02) 6263 3736

12 May 2009