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Hewison Insights

Superannuation – a cherry ripe for the picking?

Simon Curtain
Partner/Private Client Adviser
8 Feb 2013

Our superannuation system is recognised as one of the best in the World. 

The backbone of our world-class superannuation system involves the workforce directing a portion of their salary towards superannuation today, so that they have an asset base in the future from which to draw an income.

As an incentive to forego salary, the Government provides the superannuation system with a number of tax concessions. A key concession is that any income earned within your superannuation fund is taxed at 15% as opposed to your marginal tax rate which could be as high as 46.5%. It gets even better when you start a pension with your superannuation account because in this case the tax on earnings reduces to nil!

This concession provides a huge incentive to contribute to superannuation because you can save a significant amount of tax by accumulating funds within your superannuation account as opposed to your personal name.

While our politicians continue to assure us that the superannuation system is a key component in funding the future of Australian families you can’t help but think what made the system so good is slowing being eroded.

In 2007 the Government overhauled the superannuation system, calling it “Better Super”. One of the key changes under Better Super was to place a limit on the amount of contributions you could make to super each year.

In 2010 another round of reforms were announced under the title “Stronger Super”. Stronger Super has seen the level of allowable contributions drop further, so that now you can only contribute $25,000 to superannuation from your salary each year.

While we have had some changes in the right direction, like the raising of the superannuation guarantee from 9 per cent to 12 per cent, it seems there could be more changes on the way which will negatively impact our world-class system.

Documents leaked to the media recently show that the Government was considering trying to claw back some of the income they would otherwise lose, by taxing withdrawals for those with balances over $1 million. While that sounds like a lot of money, commentators have pointed out that it provides as little as $39,000 annually – hardly a life of luxury. Prime Minister Gillard has now assured us that measure is off the table, but it shows that super is under the Budget microscope and this could only be the beginning.

I have to ask, why are our leaders slowly reducing the effectiveness of superannuation when they should in fact be doing the exact opposite? With an ageing population we should be doing all we can to incentivise workers to save for their own retirement today.

Why can’t they just leave superannuation alone?


Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.