They say life is short, but it is the longest thing you’ll ever do. For most of your life, you’ll be working, and subsequently paying into your superannuation as you save for retirement and a time when you can live out your golden years.
“Retiring on $1 million isn’t enough for Gen Y.”
Because of the sheer length of time in which you’ll be paying into your super, things can change – for good and bad. Understanding them and receiving experienced superannuation advice and assistance can help you make sure you and your finances are impacted as positively as possible.
So, what’s going on in Australia’s superannuation system?
Are you happy with your superannuation strategy? An online study from Essential Research suggests that the majority are.
The way the current superannuation system works is your employer pays 9.5 per cent of your salary into your super fund, which is then taxed at 15 per cent. When asked for their thoughts on the process:
- 54 per cent of respondents approved
- 24 per cent disapproved
- 21 per cent didn’t know
Deloitte highlights concerns
However, despite most Australians showing their support, it doesn’t mean everyone believes it works in their best interests. Deloitte recently floated the idea of changing superannuation tax so that all people (both low- and high-income earners) pay 15 cents per dollar.
Total superannuation assets currently sit at $1.6 trillion nationwide.
Essentially, those earning low wages and paying 21 per cent tax would put 6 per cent into their super, while high earners paying 49 per cent tax would place 34 per cent towards their retirement funds.
Deloitte explained that the tax changes would help to prepare us for a time when there are more retirees living longer. “Retiring on $1 million isn’t enough for Gen Y,” the headline of the report read.
Total superannuation assets currently sit at $1.6 trillion nationwide, the consulting firm explained, which is expected to grow to $4 trillion in the next 10 years, and then to $7.6 trillion by 2033. Changing the taxation rules would make things more sustainable.
“Projecting 20 years into the future, our ageing population that is living longer, our appetite for lump sums in retirement, combined with the impact of any global economic adversity, highlight a vulnerability for our individual funds.”
Australians showed lower levels of support for the tax changes, according to the Essential Research report, though the majority still hold strong to the affirmative. In total:
- 44 per cent said they supported the initiative
- 32 per cent opposed
- 24 per cent didn’t know
Writing for the Australian last month, Economics Correspondent Adam Creighton believes the current Turnbull government is more responsive to change, particular in terms of tax reform. With a motive to look into renovating the superannuation system for the future and growing support from the public, many people in the Whitsunday Shire may see their superannuation policies changing in the coming years.
Regardless, if you have questions, concerns or would like to look into superannuation for the first time, the Eclipse Financial Services team is here to help.