Quality health and aged care services, affordable housing and an adequate income support system are vital to ensuring decent, secure retirements, said the Australian Council of Social Service’s submission to Treasury’s Retirement Incomes Review. It will not be possible for future governments to properly fund these essential services for an ageing population while the present, unaffordable tax breaks for superannuation investment income remain in place, without increasing already high out-of-pocket costs for these services.

The submission argues for the inequitable tax breaks for super contributions to be reformed before further increases to the superannuation guarantee are made.

ACOSS CEO Dr Cassandra Goldie said in a press release:

‘While retirement incomes have improved since the rise in the age pension, many older people under the pension age are finding themselves out of paid work, often due to age discrimination. The fastest growing group of people on Newstart are those aged over 55, particularly women, and they are struggling to get by the on the paltry rate of $40 a day, which must be urgently increased.

‘For decent, secure retirements, people need quality universal health and aged care services and secure and affordable housing. The Royal Commission into aged care has revealed serious failings, which have caused untold suffering. On top of the poor quality of services, due in large part to insufficient skilled staff with high turnover and long queues for at-home care; older people worry whether they can afford increasing out-of-pocket costs of health care and aged care including large lump-sum deposits.

‘As our population ages, we must strengthen our aged care system by ensuring it is adequately funded and affordable. This will be hard to achieve as long as the present tax breaks for superannuation after retirement remain in place. Once people retire, the investment incomes of their super fund – such as interest and capital gains – is no longer taxed at all. ACOSS calls for savings from reform of this and other unaffordable tax breaks to be used to guarantee access to quality, affordable aged care for all who need it, without the high out-of-pocket costs that presently apply.

‘With housing becoming more and more unaffordable, the proportion of older people renting or facing homelessness is expected to rise. As a first step to improve security and affordability of housing for people at risk of homelessness, we propose a 30% increase in Rent Assistance and a social housing investment package to build 20,000 homes over the next three years.

‘Our submission responds to calls to increase the superannuation guarantee. We argue the guarantee should only be increased if a number of conditions are met, including that the tax treatment of superannuation contributions is reformed so that people on low wages receive at least the same tax support per dollar contributed as those on high incomes.

‘The flat 15% tax on employer superannuation contributions means that a cleaner earning $20,000 receives no taxation support for compulsory employer contributions, yet a fund manager on $200,000 receives a tax break of 32 cents per dollar contributed.

‘In the absence of fundamental reform of the tax concessions, further increases in compulsory super contributions would further entrench existing inequities, including the serious gender gap in retirement incomes. Increasing the super guarantee alone would be of doubtful benefit to lower income-earners who face greater financial pressure during working life, and are more likely to have already achieved income replacement in retirement at the present contribution level.

‘Despite recent reforms, the superannuation system remains a generous wealth management system for people with high incomes, while people with lower incomes receive little or no benefit. This must change.’

Read ACOSS’ submission to the Retirement Incomes Review

ACOSS policy recommendations to improve security in retirement

We propose the following major reforms to the five major pillars of security in retirement: income support, compulsory superannuation, tax concessions, quality essential services, and secure affordable housing.

  1. Adequate social security payments to prevent poverty
  • A $95pw increase in single rates of Newstart Allowance, with a broader review to determine appropriate payment benchmarks and indexation arrangements
  1. Compulsory superannuation that’s sufficient, but not too much, to maintain living standards after retirement
  • Any increase in compulsory retirement saving above 10% of wages should be based on a careful assessment of the needs of low and middle-income workers before and after retirement, which we hope the Review will undertake.
  • The superannuation guarantee should not rise above this level until tax breaks for super contributions are reformed to make them fair for people with low and modest incomes.
  1. Reform of inequitable and costly tax concessions
  • Revenue-neutral reform of tax concessions to equalise tax breaks for every dollar contributed on behalf of people at different income levels
  • All super contributions (regardless of source) would attract a uniform 20% refundable tax credit up to a modest annual cap of around $15,000 in contributions.
  • The rebate would replace the complex mess of existing tax concessions for contributions.
  • In addition, the first $500 of contributions should attract a dollar for dollar tax credit to boost the retirement savings of people with very low earnings, most of whom are women.
  1. Guarantee quality, universal aged care and health services
  • $5 billion a year in additional public revenue should be raised from 2021-22 (much more in later years) to guarantee quality, affordable aged care and help close gaps in health care (especially preventive health care) by:
  • Extending the standard 15% tax rate for the investment income of superannuation funds to funds paying a pension, whose investment income is presently untaxed. (superannuation benefits would remain tax-free);
  • Reducing age-based tax breaks such as the Senior Australians and Pensioners Tax Offset (SAPTO) ;
  • Strengthening the Medicare Levy by including income from negatively-geared investments, private trusts and fringe benefits in the definition of income used
  1. Housing security for the growing share of older people who rent (currently 10% and rising)
  • An immediate 30% increase in maximum rates of Rent Assistance (around $20pw) to ease the most severe poverty among older people, and a review of Rent Assistance to examine more far-reaching reforms.
  • A $7B social housing investment package to build 20,000 homes over the next three years, as a first step to improve security and affordability of housing for people at risk of homelessness.


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