Mercer Revamps Superannuation Tax: A Win for the Government?

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Mercer is working to make the superannuation tax policy fairer, as it disproportionately favours affluent taxpayers.

Mercer is strongly advocating for a more equitable superannuation taxation system, mainly targeting those on lower incomes and women in its pre-budget submission.

To increase equity and fairness in the superannuation tax system, proposed measures include requiring all super benefits to adhere to minimum drawdown rules; paying Super Guarantee Contributions on government-funded parental leave payments; expanding eligibility for the Low Income Super Tax Offset (LISTO); lowering Division 293 taxes thresholds for high-income earners; and capping maximum super benefits at $3.4 million when reaching age 70.

David Knox, a senior partner at Mercer, asserted that the proposed recommendations would refine the super tax system now and in the years to come.

“The suggested changes tackle fundamental and prevalent problems with minimal cost while striving to enhance the system over time. We must strive for a plan that surpasses our current arrangements,” David Knox said.

“To ensure that all Australians, particularly lower-income earners and women, can have a comfortable life in retirement without going over budget, it is essential to find an economically feasible pathway.”

Additionally, Mercer’s Super Tax Reform leading to Fairer Outcomes report highlighted three key advantages of the suggested plans.

These proposed changes have the potential to bridge the gender gap in superannuation payments by offering SG payments on parental leave and extending LISTO, reducing tax benefits for those with significant amounts of savings in super, and ensuring budget neutrality while having a positive effect on the Federal Budget over time.

Mercer’s modifications are anticipated to bring a budgetary surge of $0.04 billion.

Knox highlighted the paramount need for super tax reform, declaring that retirees should be able to maintain their pre-retirement standard of living thanks to Australia’s retirement income system, which combines both the Age Pension and superannuation.

Despite this, the Australian superannuation system is both perplexing and unfair. According to him, current laws primarily favour higher-income people despite not needing them as much.

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