Tinkering undermines the system
In last week's budget, the government missed what will probably be its last opportunity to make the superannuation system fairer and more sustainable. While the government made some tough decisions, such as reneging on promised tax cuts, one of the fastest-growing expenses is the tax concessions for superannuation.
Tax concessions encourage people to save for their retirement and rely less on the age pension.
But for the very well off, they do not reduce the outlay for the age pension, for the simple reason that the very well off are never going to be on the age pension anyway.
The government's "reforms" were labelled in the budget papers as "making our retirement income system stronger, fairer and more secure", but the reforms do little to achieve that.
Those earning more than $300,000 a year will pay superannuation contributions tax of 30 per cent instead of 15 per cent. And from July 1, 2014, retirees will be taxed 15 per cent on annual earnings in their super above $100,000. The government estimates that would affect those with retirement balances of $2 million or more.
At the other end of the income scale, most people earning up to $37,000 a year effectively pay no tax on their superannuation because the government provides a tax cut of up to $500 a year.
But the Coalition has said if it wins government on September 14, it will cut this tax break that benefits the lower paid. It will also delay by two years the government's plan to gradually increase the superannuation guarantee from 9 per cent to 12 per cent.
No one wants to see the government reduce tax concessions for those who have not saved enough for a comfortable retirement, but it is wrong to give tax concessions to those who have already saved for a very comfortable retirement.
Everyone is sick of the constant tinkering with the superannuation rules. But until there is real equity in the superannuation system, more changes will likely have to be made by future governments.