ROSS GREENWOOD:
We'll get straight to our top story today and in Australia right now, if you're retired, you can have up to $1.7 million in a retirement pension account and pay zero tax on the annual income. Or if you have more than $1.7 million in that account, you'll pay 15 per cent tax on the excess income, which is a whole lot better than paying 32.5 per cent tax on normal income. You get over $45,000 a year or 37 per cent tax on income over $120,000. The shock is that the biggest superannuation fund in Australia right now has $401 million in it. There are 32 accounts with more than $100 million. Now, let's say there's a 100 million dollar fund; it earns, say, 7 per cent - that's pretty typical, The beneficiary would pay a little over $1 million a year and would keep $6 million a year. So, what's fair? That's exercising the mind of the financial Services Minister Stephen Jones, who joins me now. Stephen, many thanks for your time. I mean, Australians would say fair's fair; if somebody has taken the mickey out of this system, things need to change but your balancing act is trying to work out how much super is enough.
STEPHEN JONES:
Exactly so, which is why we are starting with a conversation about what the objective of superannuation is. That will inevitably lead to a discussion about dignity in retirement, respect and safety in retirement and, you know, we want to go through that process, consult with the Australian community. But already at this point in the process, we can see that, you know, somebody with $100 million or as you say, $400 million in their superannuation account, nobody can seriously arguing - be arguing that that's for retirement purposes, good on them, they found a way to minimise their tax, but actually, it's distorting the system. And a lot of people will look at it and go, that's just not fair. So we know what's at the outer end of the marker. We don't know what the right number is yet and that's why we want to have a consultation with the Australian people.
GREENWOOD:
There is one issue here that I consider, and that is an age pension right now, for a married couple, which is basically the base level, let's be honest, is around $40,000 a year. There's almost no tax on that but that's the equivalent of a person having a million dollars earning 4 per cent and you'd say that a person with a million dollars stashed aside would be going, okay if they've also got their house. That's the juggling act. You've got somebody who's worked hard all their life to get a million bucks in super or whatever it might be. That's now the equivalent of effectively what the age pension is paying.
JONES:
That's right. Look, the previous government got halfway there, I've got to say. They put in place annual contribution caps and then they put in place a transfer balance cap, as you will be aware, which is the amount of money you can move out of accumulation and into the pension phase and the earnings on that and the annual earnings on that up to a limit are tax free. We got to get the number right and as I say, we know what the outer limit is and we know that some of the stuff that's going on in the system just isn't right. We don't know where we need to land yet and that's why a good long consultation with the Australian people is - and that's why I should start, actually with what's the objective of the system in the first place, why are we doing this and what is the role of superannuation in the whole area of retirement savings and providing for a dignified and safe and healthy retirement? Superannuation is one part of that. There's other bits in there as well.
GREENWOOD:
So Stephen what's your - I was going to ask you about that Stephen, because one of the issues is, and one criticism is that it's not for generational transfer. In other words, a lot of people end their lives with significant amounts of money in their superannuation funds, which goes to the next generation. A lot of people try to hang on to that pot of capital. Now, in an ideal world, of course, the pot of capital would end up being zero and there'd be nothing for the next generation, they'd get the house or whatever was left over. What's your own view on that?
JONES:
Yeah, look, it's really important that we separate the concept of leaving a bequest to our kids. I think every Australian if they have the ability to want to leave some money or some assets aside to their kids would go, well, good on you that's passing something onto the next generation. There's absolutely nothing wrong and there's something to be celebrated about that. But there is a question about how much should the Australian taxation system be subsidising? That handing on a bequest from one generation to the next. And for as long as that money has been held within superannuation, and that money and those assets have been accumulated inside a superannuation account, there's a significant subsidy going on. And that's not what superannuation is all about. Superannuation is all about ensuring that we put money away to look after ourselves in retirement, not so that we can put in place some sort of tax preferred estate management system. So, again, that all ties back to having a conversation about the objectives of superannuation, what it is about, what it's not about. Again, it's really important that we stress this point, we support Australians being able to save and pass something on to their kids. But there is a genuine question that needs to be resolved about whether the taxation system should be subsidising doing that.
GREENWOOD:
Okay, so I've seen some numbers about this, about the amount of money that is paid by, effective or given up by the Australian taxpayer subsidising retirement savings in Australia. Just how big is that number on an annual basis?
JONES:
Well, it's tens of billions of dollars. Tens of billions of dollars is going towards the effective tax subsidy of superannuation. Important point, we set that system up, Labor set that system up because we wanted to ensure people were encouraged to save for their retirement and that if we're preserving savings until your retirement, then there should be some added incentive and benefit for doing that. So, that's why there is tax treatment and preferential tax treatment for superannuation savings. But a legitimate question has to be asked about how far you go with that when you've got tens of billions of dollars in tax subsidies going towards those provisions. Again, all gets back to what the objective is. What's the objective? What are we trying to build here with our superannuation system? Decent retirement, safe retirement, not a system for tax management and handing on a bequest to the next generation.
GREENWOOD:
Financial Services Minister Stephen Jones. Many thanks for your time on the programme today.
JONES:
Great to be with you, Ross.