By Geoff Wilson
Ahead of today’s budget and weeks out from the looming federal election, superannuation is firmly on our radar.
In a nation grappling with an ageing population and mounting financial pressures, the need for clear, consistent policy around our $4.2 trillion retirement saving system has never been more urgent.
For over three decades, super has been a cornerstone of Australia’s economic landscape, providing financial security for 17 million citizens and contributing nearly $50bn annually to government tax revenue. With the proportion of Australians aged 65 and above set to rise by 40 per cent over the next two decades, its importance cannot be overstated. Now more than ever, we need to promote super, ensuring that future generations can rely on it while alleviating fiscal pressure on the federal budget.
Yet – astonishingly – we are currently operating in a policy vacuum when it comes to our superannuation.
Looking to this year’s federal budget, one of the most contentious issues remains Labor’s proposed tax on unrealised gains in super funds exceeding $3m – a proposal that failed to garner sufficient support in the Senate last year, despite passing the House of Representatives.
The proposed tax, which would force individuals to pay tax on paper profits they may never actually realise, has caused widespread trepidation. If passed, it would undermine the longstanding principle of taxing only realised gains and could serve as a slippery slope, opening the door for broader tax policy changes.
It could also have many unintended consequences. Some Australians could be driven to move their savings out of super and into other assets, potentially reducing the funds available for retirement savings and leaving a future generation to shoulder the financial burden. Others may turn to family trusts to protect their retirement savings, exacerbating the fiscal strain on future budgets.
Despite the proposed tax’s unpopularity and failure to pass the Senate, it remains embedded in the federal Treasury’s forward estimates. In February, the tax was included in the 2024-25 federal Treasury portfolio additional estimates statements, signalling that it may still be implemented. The upcoming federal budget will provide critical insight into whether this tax will be introduced in July 2025, how it will be phased in, and what kind of revenue the government expects it to generate.
To be clear, I am not calling for super to remain untouched by government. With its complicated array of caps, thresholds, and rules for transition to retirement, the current system can be confusing. As accountants increasingly struggle to navigate superannuation’s complexities, it is clear that simplifying the system would benefit all Australians – reducing administrative burdens, improving transparency, and enabling individuals to make more informed decisions about their retirement savings. Another issue looming over the federal budget is the scheduled increase in the Superannuation Guarantee to 12 per cent. While the longterm benefits of higher retirement savings are clear, the immediate impact on businesses – particularly small enterprises – should not be overlooked. A nuanced approach is necessary to ensure that the super system benefits workers without unduly burdening businesses.
Furthermore, the ongoing housing affordability crisis demands that we consider whether super could help address the issue. While controversial, the idea of allowing limited access to super for first-home purchasers is worth exploring, especially as demand-side and supply-side reforms are urgently needed.
For many Australians, the risk of outliving their savings is a very real concern. Rising life expectancy and increasing living costs mean that many will need more than just a basic pension to survive in retirement. A comprehensive consideration of the Commonwealth Retirement Income Review – largely forgotten but still relevant – is essential. The report recommends a broader range of super products tailored to individuals’ consumption patterns, which would offer protection against longevity risk. Innovative products, such as those that provide stable income without requiring regular monitoring, should be seriously considered. Like others, we at Wilson Asset Management have attempted to address both longevity risk and income. On April 30, we will launch via an initial public offering a new listed investment company, WAM Income Maximiser, on the Australian Securities Exchange. The company aims to provide investors with monthly income and capital growth, while taking less risk, by investing in high-quality equities and corporate debt.
Treasury modelling predicts that the $59bn currently spent on the aged pension will decrease as a percentage of GDP, largely due to the expansion of the self-managed super fund sector. If policy changes undermine the SMSF sector, it will disrupt this critical driver of fiscal sustainability and stability. It’s worth noting that only 5 per cent of SMSF members who receive retirement benefits also rely on the age pension, demonstrating how SMSFs contribute to reducing the long-term burden on the government.
This federal budget is a pivotal moment. It offers an opportunity to reshape the super system to be more equitable, transparent and sustainable. It’s vital that the government balances fiscal responsibility with the long-term wellbeing of Australians, ensuring that super remains a cornerstone of a secure and dignified retirement for all.
To achieve this, we need a budget that focuses on fairness, simplicity and adequacy.
We must create a super system that serves its intended purpose – providing a secure retirement for all Australians – while avoiding the dangerous pitfalls of shortterm political manoeuvring. Failure to address these issues head on will perpetuate existing inequities and undermine the system’s long-term viability.
A fairer, more accessible super system is not just a matter of financial policy; it’s a matter of securing the future for every Australian.
Geoff Wilson is founder and chairman of Wilson Asset Management.
