Budget may strike at lump sums
Higher superannuation taxes for upper income earners may not be the only thing contained in the Federal Budget, with increasing suggestions that the Government will also move to limit access to lump sums and force fund members to dedicate a portion of their balances to income streams.
The Australian Institute of Superannuation Trustees (AIST) has been among the organisations which have supported the income stream proposal in its pre-Budget submission, and the option has also gained broader support across the industry.
Deloitte partner Russell Mason suggested that it represented a worthwhile option, with many of those receiving advice from financial planners already opting to access income streams alongside modest access to lump sums.
However he cautioned that access would still need to be made available to lump sums to enable retirees to pay down debts ahead of moving fully into retirement.
The new chief executive of the AIST, Tom Garcia, also supported the concept of income streams during a roundtable conducted by Money Management's sister publication, Super Review.
However, in doing so, he sought to clarify the degree to which the tax concessions being applied to superannuation actually weighed on the public purse.
"You know, we hear that it's going to be $45 billion, but that's foregone tax, that's not necessarily money that Treasury would end up with in their pocket. Because if it didn't go to super, more than likely it would go somewhere else - it wouldn't all go back to Treasury," he said.
"That's just the amount that the Government is foregoing for people to be able to save money for their retirement," Garcia said.
"And just to look at it as a tax, or an amount of money we've given away because ‘we're so generous and we need some of it back', moves away from the whole idea of why it was designed in the first place.
"The whole idea is to provide retirement income streams for people in retirement.
"It's not about giving someone a tax dodge," Garcia said.
He said that rather than talking about the tax foregone by Government because of the concessionality of superannuation, there needed to be a greater focus on the building of a retirement income stream and how much was being regenerated back into the economy.
Mason said he believed that any move with respect to income streams would have the benefit of alleviating pressure on the age pension and budget outlays over the long term.
The concept of the Government acting on income streams and annuities has been canvassed as possible part of the past two Federal Budgets.
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