Provided by Mercer: 14/5/08
Tax cuts for low and middle income Australians are welcomed, but only increase the need for more incentives and Government support for working Australian families to save, says consulting, outsourcing and investment consultancy Mercer.
Mercer’s superannuation expert, Dr David Knox, said the tax cuts highlight the need to make Australia’s superannuation system fairer by providing low and middle income earners with more financial support for their superannuation.
‘”Australians on a low or middle income need to be supported to save for their future,” he said.
From 1 July 2008 the 15 percent tax rate will apply up to $34,000 (up from $30,000) and the tax free income level will increase to $14,000 (from $11,000). However, these people will continue to be taxed at a rate of 15 per cent on their employer superannuation contributions, which is at the same or higher level than their level of income tax.
“These individuals are receiving virtually no taxation support, even though their superannuation contributions are preserved for many years,” Dr Knox said.
Mercer believes the Government missed an opportunity to present much needed longer term superannuation reform and urges the Government to seriously consider the following reforms as part of the review of the tax system.
1. Abolish contributions tax for those earning less than $34,000 p.a – improving fairness in the system and providing a clearer incentive to save for their retirement.
2. Introduce compulsory member contributions phased in over several years for individuals earning over $34,000 p.a, to be paid on either a pre or post income tax basis. Post-tax contributions would receive a tax deduction, easing the financial pressure particularly on Australian families.
For more information, contact:
Dr David Knox
Mercer
Phone: (03) 9623 5464
Libby Woolnough
Mercer
Phone: (03) 9623 6923
This information has been prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a licensed or appropriately authorised financial adviser before making any investment decision.
