Calls to level insurance tax playing field
Australia’s tax regime should be amended to give insurance cover the same status irrespective of whether it is obtained inside or outside of superannuation.
That is one of the key recommendations flowing from a roundtable conducted by Money Management’s sister publication, Super Review, during last week’s Association of Superannuation Funds of Australia national conference in Adelaide.
Mercer partner Russell Mason (pictured) pointed to the taxation anomaly that existed with respect to insurance obtained via a superannuation fund and insurance obtained outside of the super environment.
“How do you reconcile the fact that if I obtain death cover via a super fund it is entirely tax free with the fact that if I obtain that same cover outside of super it is taxed?” Mason asked.
Mason’s comments were framed in the context of MetLife Insurance chief executive Mark Lieberman expressing concern that the introduction of MySuper would add to Australia’s underinsurance problem if super fund members were given the opportunity to ‘opt out’.
Lieberman said that he did not believe the opt out arrangements would necessarily lead to a mass exodus from insurance, but said he was concerned that those who did opt out would be those who could least afford to.
Mason pointed to the fact that in the past it was common practice in Australia for employers to provide insurance cover to their employees, and suggested that this was something that might be worth encouraging again.
“Why aren’t we encouraging employers to provide death cover outside of super as a top-up as a true employee benefit?” he asked.
Australian Ethical’s head of sales and marketing, Paul Harding-Davis, said he believed the Cooper Review’s MySuper concept had underestimated the level of engagement of most people with their super.
“There is a lot more engagement than the Cooper Review implies, much more,” he said.
AustralianSuper’s general manager of growth and new opportunities, Paul Schroder, said that while many people had suggested that the underlying premise of MySuper was “paternalistic”, he believed this ignored the reality of the superannuation guarantee.
“You have a Government-mandated 9 per cent which is tax-advantaged, you cannot get much more paternalistic than that,” he said.
Mercer partner Russell Mason has urged the financial services industry to lobby for reform for insurance taxation. Watch the interview on Money Management 4minutes.
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