IFSA – Investing in Australia’s savings future

According to IFSA’s industry statistics, there are about 9 million Australians who have life insurance or managed investment savings that will be affected by the business tax reforms. It is not surprising therefore that IFSA elicited considerable interest when it contacted the various community groups whose charters cover these savings vehicles.

To capitalise on this interest IFSA convened an Investor Symposium earlier this month. The symposium began with presentations and discussions on the current and proposed business tax arrangements and continued with workshop sessions to explore the impact of tax changes on savings. It ended with questions and answers on tax at IFSA's member luncheon with the Minister for Financial Services and Regulation, the Hon Joe Hockey. Just prior to the luncheon the symposium participants met with the Minister's Senior Adviser to discuss some of their concerns.

IFSA's Investor Symposium

The following groupings were represented at IFSA's tax symposium:

ARPA Over 50's Association

Association of Independent Retirees

Australian Consumers' Association

Australian Pensioners' & Superannuant's Federation

Australian Shareholders' Association

Consumers Federation of Australia

Council on the Ageing

Federation of Ethnic Communities Councils of Australia

Financial Services Consumer Policy Centre

Maurice Blackburn & Co

National Information Centre on Retirement Investments

Naturally, these groups have spent most of their lobbying energy on the GST legislation that is currently being examined by the raft of Senate inquiries into A New Tax System. At first glance it appears that the Review of Business Taxation is about reforming business taxes such as the company tax rate, FBT, CGT and the like. However, as a number of these advocacy groups found at the symposium it is a virtual potpourri of changes that have the potential to make substantial and lasting inroads into the way that savings are taxed.

These investor and retiree groups are interested in the welfare of savers generally, but each brought to the table a slightly different perspective on the tax reform process. As well, each of the groups is at a different stage in the learning curve on tax reform of savings. These two factors alone made it difficult for the symposium to arrive at unanimous conclusions during the ten hour exchange of views. However, agreement was reached in two critical areas.

The first was that IFSA should make a media release advising that the symposium had been held, and setting out the areas of concern that had been identified by one or a number of the participants. The second and probably more critical outcome was that the network created by the symposium should continue so as to allow on-going exchanges of view and, where necessary, the formation of aligned positions on areas of mutual concern. If needed, further symposia could be convened to hammer out solutions to some of the more vexed savings problems. IFSA's media release of 7 March 99 gives a clear indication in this regard.

Cash management trusts and other managed investments

First, it acknowledges the Treasurer's announcement of 22 February confirming the flow through for cash management trusts and states that this should be applied to other managed investments.

Second, the media release alerts the Government not to narrow savings opportunities. There is also a signalling of a concern that tax reform should take proper account of the role that life insurance plays in providing financial security for Australians.

PSTs and life insurance superannuation

In relation to superannuation, the media statement communicates a concern that under the proposals, pooled superannuation trusts and life insurance superannuation could be the subject of a withholding tax whereas other superannuation arrangements will not. No doubt these advocacy groups will maintain a watchful eye on what develops in this key area of retirement incomes policy.

In coming weeks IFSA will be developing its final submission to the Ralph Review of Business Taxation. It will endeavour to share its views with these key investor and retiree groups. Hopefully, the final Ralph paper will reflect the pro-savings views of the symposium.