Exciting news for Australian workers and retirees — a major reform and overhaul of the superannuation system has been proposed, and it’s set to shake things up for the better.
The Actuaries Institute has released a report suggesting changes that could save a whopping $1 billion in operational costs every year. Its proposed changes also aims to make the system fairer for everyone.
Here’s what’s being proposed: a flat 10 per cent tax rate for superannuation. This means less tax while you’re building your nest egg. So you would be down from the current 15 per cent. However, you’d have a slightly higher tax rate in retirement, where it would increase from zero to 10 per cent.
There’s also a clever fix to close loopholes for retirees withdrawing large sums of super and relying on the aged pension. The plan introduces withdrawal thresholds of $250,000 and $150,000 annually, with pension adjustments to support those affected. This tweak encourages retirees to use their super for its intended purpose, i.e. supporting a comfortable and dignified retirement.
Another smart change is around bequests. The proposed reforms would raise the age for tax-free thresholds from 60 to 67. It would also make adjustments based on whether the payment goes to dependents or others.
Jennifer Shaw, one of the authors, says this ensures the system remains fair while still allowing for big withdrawals for important expenses. This could be for healthcare or mortgages.
The authors also want to remove the complicated tax rules around concessional and non-concessional contributions. This reform would make superannuation much simpler for everyone. So it would be easier to save, spend, and enjoy your superannuation with less stress.
