The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Helen Coonan

Helen Coonan

Minister for Revenue and Assistant Treasurer

26 November 2001 - 17 July 2004

Media Release of 28/04/2004

C025/04

28 April 2004

BUSINESS COALITION’S $5B WISH-LIST BUT NO WORD ON REDUCING SUPER FEES

A business coalition today laid out its $5 billion a year wish-list for super without one mention of a quid-pro-quo on fees to help boost the super savings of Australian workers, Minister for Revenue and Assistant Treasurer, Senator Helen Coonan said today.

“While the Government welcomes debate on super, unilateral calls for further concessions make the industry vulnerable to charges of self-interest,” Senator Coonan said.

“The calls from industry would be a lot more convincing if they were accompanied by some action from the super industry itself to relieve the impost that super fees and charges have on the retirement savings of Australian workers.

“Australia has a world-class superannuation system and the OECD and International Monetary Fund (IMF) have both recognised that Australia is well-placed to meet the pressures and growing demands an ageing population will have on Government resources.

“The Government has a responsibility to ensure that further concessions for super are well-targeted, actually increase the retirement income savings of Australian workers and represent value for money.

“The Government recognises the importance of incentives for the Australian population to save for their retirement. Spending on super concessions already totals $11 billion per year – that is about double what the Government collects in super taxes.

“Those concessions include the $1.1 billion superannuation co-contribution, the contributions tax offset which compensates people who take their savings as an income stream for the contributions tax paid and more flexible options for retirement so Australians can retire when they’re ready.

“Compare this to the super industry which takes an estimated $6.9 billion each year in fees and charges and then is part of demands for an additional taxpayer funded $5 billion wish-list which would substantially benefit industry but not equally benefit individual retirement savings.

“For example, abolition of contributions tax will ultimately benefit all super funds by increasing their fees and charges take and will not have the desired ‘across the board’ effect the industry claims it will have. In fact, retirees are more than 100 per cent compensated for every dollar of contributions tax paid by the pension offset.

“Abolishing contributions tax and the compensating pension rebate would make many retirees worse off and does not represent good value for money.

“The ‘Call for Super Action’ also proposes a savings benchmark of 65 per cent. The Government does not support saddling Australian workers with benchmarks for their super savings because individuals have a different idea of how they would like to live in retirement and different spending and saving priorities during their working lives.

“However, Treasury analysis indicates that the super guarantee system, combined with the improved aged pension, will produce net replacement rates in excess of 76 per cent for even those on median earnings after 30 years of contributions or 85 per cent after 40 years of contributions.

“To boost retirement savings, the Government prefers incentives such as the Government’s $1.1 billion co-contribution for low income earners and a policy of extending this up the income scale has some merit. Any further concessions in the super arena will need to be balanced against other spending priorities such as health, education and defence.

“The Government is interested in providing retirees with additional choice and flexibility. While calls from industry to get rid of allocated pensions or to enable them to be turned ‘on and off’ have some appeal, the Government must also ensure that super is safe and that the system isn’t open to abuse.

“With significant concessions, super is already a preferred way to save for retirement. The Government preserves those taxpayer funded concessions by encouraging retirees to take their savings as an allocated pension. This ensures super isn’t accumulated as just a tax-effective way to pass money along to the next generation.

“Industry should focus more positively on the way forward. By building confidence and educating Australians about the benefits of saving for their retirement in a concessional environment, the super industry and Australians more broadly will immediately benefit.”