Provided by Mercer: 11/5/10
The Henry Tax Review is a wide-ranging review of the Australian taxation system. It was established by the Rudd Government in 2008. It was conducted by Dr Ken Henry, Secretary to the Treasurer, together with a panel of experts.
The Review was established in order to conduct a detailed examination of Australia’s tax and transfer system (including state taxes) as well as to make recommendations to position Australia to best deal with the demographic, social, economic and environmental challenges of the 21st century.
The panel presented their findings to the Government in December 2009 and the Government released the final report and provided its initial response on 2 May 2010.
What are the superannuation proposals?
As part of its response, the Government is proposing to implement four specific measures directed at improving the equity of the superannuation system and increasing Australians’ retirement incomes. These are:
- Gradually increasing the Superannuation Guarantee (SG) from 9% to 12%, by 2019-20 (starting 2012-13).
- Increasing the SG age limit from 70 to 75 from 2013-14
- Introducing a new Government superannuation contribution of up to $500 for low-income earners commencing in 2012-13 and paid in 2013-14
- Increasing the concessional contribution limit to $50,000 for people aged 50 and over who have account balances of less than $500,000 from 2012-13.
The Government has also flagged more changes to come (e.g. simplifying the tax system to make it easier for most Australians to lodge a tax return and improving incentives to save outside super). A number of Henry’s recommendations have been ruled out whilst the Government made no comment on many others.
The superannuation changes announced represent a major step forward in improving retirement incomes in the face of an ageing population and provide additional confidence for all Australians to use super to save for their retirement.
What does this mean for you?
The changes announced by the Government this week are not immediate and at this stage they remain proposals. It’s likely that industry consultation will be required in order to determine how the changes will be implemented and what legislative changes will be required.
As there were many recommendations in the Henry Tax Review that the Government has not provided comment on, it’s expected that other changes may be announced.
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.
