Australian Government Releases Future Tax Systems Report Into Retirement Incomes

by Mary Swire, Tax-News.com, Hong Kong

15 May 2009

The Australian government has announced the launch of the Australia's Future Tax System (AFTS) Report on the retirement income system, prepared by the AFTS Review Panel.

According to the government: "the report accompanies historic measures made in the May 12 Budget to boost the level of the pension so that older Australians can live in dignity through their retirement".

"Importantly, these measures have been delivered in a way which is responsible and sustainable over the long-term."

The government announced that it welcomes the Retirement Incomes Report as laying the foundations for a retirement income system that "meets the challenges of adequacy, fairness, simplicity and sustainability in the context of an ageing population".

The report found that Australia's three-pillar retirement income system – consisting of the means tested Age Pension, compulsory saving through the superannuation guarantee and voluntary saving for retirement – is well placed to meet these challenges and should be retained.

The Panel found that tax-assisted voluntary superannuation contributions should be more fairly distributed, and questioned whether the current cap on the concessions was appropriate. The Panel also recommended that the Age Pension age should be gradually increased to 67.

Therefore, in conjunction with the pension reforms, the government moved to "improve sustainability and fairness in the retirement income system in the 2009-10 Budget, through reducing the concessional superannuation caps and adopting the Panel's recommendation on the Age Pension age".

"Further, the government noted that the Panel recommends retaining aspects of the current system, with improvements to ensure that key challenges can be met in the longer term". The Panel has recommended that:

• The current superannuation guarantee provides an adequate rate of compulsory saving and should be retained at 9%.
• The age at which Australians can access their superannuation (the preservation age) should be gradually increased to 67 years, subject to further examination of how mandatory retirement ages should be treated. This would complement the Government's decision to adopt the report's recommendation to increase the Age Pension age to 67 years.

The government also noted the Panel's decision to defer final recommendations on other related issues until the December report to enable consideration in the context of the broader tax-transfer system.

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