Australia's Future Tax System

Retirement Income Strategic Issues Paper

Appendix E: Key messages from submissions and public consultation

This report has been developed with the help of many people, in particular those who provided, at short notice, valuable submissions and/or participated in direct consultations with the Panel and Secretariat. The Panel's community forums have also offered valuable information on issues of concern to the community about the retirement income system.

The key themes from submissions and the community forums are detailed below.

Retirement income system

An overwhelming majority of submissions from industry and individuals support the three-pillar structure of the retirement income system and consider that it should be maintained into the future. This sentiment was shared by participants at the Panel's community forums.

Submissions generally focus on refinements to the three-pillar structure to reduce complexity, enable individuals to better manage longevity and investment risk, and provide individuals with greater flexibility and choice.

Some submissions explicitly address the five objectives for the retirement income system presented in the Retirement income consultation paper — broad and adequate, acceptable, robust, simple and approachable, and sustainable. Of these submissions, the majority express strong support for the objectives.


Several industry submissions recommend the government set an explicit adequacy goal. Many of these submissions support the use of the Association of Superannuation Funds of Australia's (ASFA's) 'modest but adequate' standard as a suitable floor for retirement incomes, and suggest the government provide incentives to encourage people to achieve ASFA's 'comfortable/affluent' standard. A small number of submissions state that government support above the 'comfortable/affluent' standard should not be provided. One submission proposes the establishment of an explicit 'Australian Minimum Standard of Living', guaranteed by social security payments.

Most submissions from individuals consider the Age Pension to be insufficient to provide an adequate income in retirement, and support increases of around 30 per cent in the current base rate. Several of these submissions propose tightening the Age Pension means tests to contain the costs of increasing the base rate. Some submissions advocate rolling allowances common to Age Pension recipients, such as the utilities, pharmaceutical and telephone allowances, into the base rate.

Submissions on the Age Pension means testing arrangements are mixed. Some recommend replacing the assets and income tests with a single income test, while others favour a single assets test.

A number of submissions, and several participants at the Panel's community forums, argue that contributions to superannuation should be increased. While a majority of industry submissions continue to favour an increase in the superannuation guarantee rate, several organisations have moderated earlier proposals to raise the superannuation guarantee rate, in light of the current global economic climate and revised economic modelling of retirement incomes.

In contrast, most individual submissions support maintaining the superannuation guarantee at 9 per cent on the grounds that an increase would impact adversely on their current living standards. One submission proposes that the rate be reduced for low income and middle income earners. One participant at the Panel's community forums suggested that the superannuation guarantee not be compulsory for younger Australians, who may have other expenditure/saving priorities.

Several submissions favour soft compulsion or mandating personal contributions to improve adequacy.

A large number of submissions from both industry and individuals emphasise the importance of encouraging voluntary saving and propose a range of additional incentives, including reducing superannuation contributions tax or boosting the superannuation co-contribution.

Many submissions highlight gaps in superannuation coverage and propose extending the superannuation guarantee to: proposed paid maternity and parental leave; unused long service leave; entitlements to wage payments; the self-employed; and carers. Several submissions also propose that the $450 minimum superannuation guarantee threshold be abolished or applied to an individual's aggregate income, so that people who hold multiple low paying jobs qualify for superannuation guarantee contributions.

Some submissions suggest the government mandate the provision of end benefit projections by superannuation providers to assist individuals in monitoring how their savings are tracking against their goals. One submission suggests these projections allow for debt, as well as assets, to illustrate the consequences of carrying debt into retirement.

Several submissions express concern about the superannuation savings of women and suggest there is a need for specific retirement income concessions and policies for women.

A small number of submissions suggest the government adopt policies that would assist individuals in accessing the equity in their homes. For example, one submission recommends the establishment of a 'Home Renovation Service' so retirees can undertake essential home repairs that would enhance their ability to access equity release products.

Some submissions argue that improving superannuation funds' efficiency and investment performance is an important means of improving retirement income adequacy. They propose banning commissions on retirement income products as a first step towards this goal.


A large number of submissions, particularly from industry, focus on the implications of improved life expectancies for retirement income policy.

Several submissions express concern that the transition to retirement arrangements are not effective in encouraging people to work beyond Age Pension age. One submission proposes the introduction of a rebate for earned income, while another suggests providing an actuarially fair deferral of the Age Pension.

Most submissions note that the government provides insurance against longevity and investment risk through the Age Pension. Some consider that the government should encourage the market to provide deferred annuities or longevity insurance, such as through the issuance of CPI-indexed government bonds, or the removal of impediments to product innovation. Other submissions suggest the government have sole responsibility for the provision of these products, given its ability to pool risk. This view was shared by participants at the Panel's community forums. Participants at these forums favoured government provision on the grounds that private provision may give rise to high fees and charges, complexity and potential conflicts of interest.

Several submissions suggest the retirement income system should encourage individuals to take their benefits as an income stream. For example, one submission considers that this could be achieved through the exclusion of lifetime annuities from the calculation which determines the maximum bond payable for entry to an aged care facility.

Some submissions express concern about the funding of aged services into the future.

A small number of submissions recommend that the Age Pension age reflect projected improvements in life expectancy.

One submission argues proposals to address longevity risk should not disadvantage indigenous Australians, who typically face lower life expectancies.


Submissions present mixed views on the Age Pension age, superannuation preservation age, and age from which tax-free superannuation can be accessed. Some submissions propose these ages be aligned. Other submissions support increasing the superannuation preservation and tax-free superannuation ages to encourage workforce participation and later retirement. Some submissions support the maintenance of a wedge between the superannuation preservation and Age Pension ages (for example, on the grounds that a wedge encourages individuals to boost their voluntary saving).

Several submissions argue that the Age Pension age be maintained at 65 years as an increase would disadvantage individuals who are unable to work (for example, manual labourers), notwithstanding the increase in their average life expectancy.

Some submissions suggest that individuals with a disability or caring responsibilities be able to access their superannuation from age 55 years, regardless of their income and asset levels.

Some submissions express concern over the inability of individuals aged over 75 years to contribute to superannuation. Several submissions propose the abolition of the superannuation contribution work test to enable individuals of any age to make voluntary contributions to superannuation. This view was shared by several participants at the Panel's community forums.


Most submissions favour the expansion of the existing superannuation tax concessions. In contrast, views at the Panel's community forums were mixed — some participants favoured the expansion of concessions, while others were of the view that all concessions should be abolished.

Submissions generally express strong support for the maintenance of tax-free superannuation payments for individuals aged over 60 years. Several submissions support the tax-free payment of all retirement pensions from age 60 years, including those paid from foreign sources and untaxed superannuation schemes. This proposal was also supported by several participants at the Panel's community forums. A small number of submissions suggest that death benefits paid from age 60 years should also be exempt from tax.

A number of participants at the Panel's community forums proposed that the taxation treatment of savings held outside superannuation be reviewed.

Many submissions express concern over the distribution of concessions, and suggest that low income earners receive a rebate of superannuation contributions tax. This view was shared by participants at the Panel's community forums. Some submissions suggest that the superannuation tax concessions for high income earners be removed, while others argue that they be retained on the grounds that they reduce Age Pension outlays.

A small number of submissions suggest that tax deductibility for personal superannuation contributions be made universal.

Several submissions discuss the superannuation contribution caps. Some submissions consider that the pre-tax contributions cap should be averaged to accommodate individuals with broken work patterns. Others suggest that the higher $100,000 cap for individuals aged over 50 years be permanently retained, and support an increase in the cap for those aged under 50 years. One submission proposes the introduction of a lifetime contribution cap so people can make contributions when funds become available. Some participants at the Panel's community forums suggested that the caps be abolished.

A large number of submissions outline alternative taxation arrangements, many of which involve greater integration between the taxation, superannuation and social security systems. For example, some submissions recommend taxing superannuation contributions at an individual's marginal tax rate, while others propose limiting contributions to after-tax income, supported by the provision of a government co-contribution for low income earners.


A large number of individual submissions argue that the current regulatory arrangements for self-managed superannuation funds (SMSFs) are sufficient, and should not be broadened.

Several submissions recommend the government focus on enforcing existing SMSF compliance rules. Suggestions to improve compliance include: implementing a communication strategy to emphasise the importance of trustee obligations; encouraging SMSF trustees to consult specialist SMSF advisors; and imposing mandatory training courses on trustees who repeatedly fail to meet their compliance obligations.

One submission claims that increasing the reporting requirements for SMSFs would expand the role of superannuation specialists at the expense of members.