THE Government’s positive response to the Financial System Inquiry’s (FSI) recommendation (11) requiring superannuation trustees to pre-select a comprehensive income product for members’ retirement, has been welcomed by the Institute of Public Accountants (IPA).

“There is extensive legislation that regulates how much and the manner in which Australians contribute to superannuation, but limited rules relating to how they can withdraw superannuation,” said IPA chief executive officer, Andrew Conway.

“Many retirees take either a partial or total lump sum, with a high percentage of these using a lump sum to pay off a mortgage or purchasing other non-income supporting assets.  A smaller percentage of retirees are investing in a pension product such as an annuity or life pension, or an income earning product such as a bank account.

“While the IPA supports choice in superannuation, the current use of retirement funds is not always appropriate and does little to diminish the future pension burden faced by a shrinking workforce and aging population.

“The IPA therefore believes there should be suitable incentives which encourage retirees to invest in income streams such as pension and annuity products.

“Annuities may be the missing link in people’s thinking between drawing down from their existing superannuation and finding sustainable income streams that support their retirement.

“This would mean that people need to opt out in order to receive a lump sum payment, which is the more common method of withdrawing super currently.

“Annuities support the policy intentions of the superannuation system and will generally better provide for the longer term needs of retirees and protect against cost of living risks,” said Mr Conway.

www.publicaccountants.org.au

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THE Institute of Public Accountants (IPA) has welcomed the Government’s rejection of the Financial System Inquiry (FSI) proposal to reinstate the banning of limited recourse borrowing arrangements (LRBA) within an SMSF.

“The IPA has advocated that rather than a ban on LRBAs, there should be more targeted measures to address inappropriate use of gearing linked to poor quality advice,” said IPA chief executive officer, Andrew Conway.

"The IPA believes that the issue is not SMSF borrowing per se, but inappropriate advice provided by unlicensed advisers.

“A sledgehammer approach was never going to be an appropriate way to eliminate the use of poor quality advice relating to SMSF related gearing.

“We agree with the Government’s observation that while some anecdotal concerns over LRBAs exist, there is insufficient data to justify a ban.

“We need better analysis of ways to address the risks surrounding borrowing before merely imposing an outright ban.

“Interestingly, there are also no alternative measures other than an outright ban to mitigate some of the concerns raised.  For example, if they are worried about the diversification, why not consider excluding LRBAs for funds with small balances.

“We welcome the Government’s common-sense approach to this measure,” said Mr Conway.

www.publicaccountants.org.au

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SUPERANNUATION organisations are concerned that the Tax Expenditures Statement overstates the tax concessions for super.

The Statement attempts to measure the value of tax concessions received by taxpayers, or the revenue forgone by government. Its publication increases the transparency and scrutiny of tax exemptions.

The 2014 Statement provides that the cost of the tax concession for employer superannuation contributions is $16.3 billion, and for superannuation entity earnings is $13.4 billion.

If taxpayer behaviour and the effects of other government programs are taken into account, the estimates become $15.6 billion and $11.8 billion. This reflects taxpayers attempting to use their money in other tax effective ways.

Mercer Consulting and the SMSF Owners’ Alliance will appear today at a public hearing into the Statement.

Some of the issues raised about how the Statement treats superannuation are:
• it does not consider the long run savings from reduced use of the means-tested pension
• many commentators incorrectly add together the superannuation figures in the Statement, which overstates their combined cost
• the Statement uses an income tax benchmark, which gives a much higher tax expenditure than an expenditure tax benchmark (used in some other countries).

Committee Chair, Bert van Manen MP, said that the Statement’s treatment of superannuation was an important issue in the inquiry.

“Many Australians have a major investment in superannuation. We need to make sure that we have the right information so that we can have the best policies for people to get the most out of their retirement,” he said.

Public hearing
Date: Wednesday, 21 October 2015
Time: 4.10 – 4.40 pm  Mercer Consulting
         4.40 – 5.10 pm  SMSF Owners’ Alliance
Location: Committee Room 1R5, Parliament House, Canberra

For information about the inquiry: contact the committee secretariat by telephone (02) 6277 4821, e-mail This email address is being protected from spambots. You need JavaScript enabled to view it., or visit the committee website http://www.aph.gov.au/taxrev.

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VICTORIAN businesses forecast strengthening sales and employment in what is anticipated to be a positive end to 2015, according to the quarterly VECCI Survey of Business Trends and Prospects released today.

“Following a tough second quarter of 2015, it is pleasing to see key business indicators rebound and the Victorian economy poised to round-out 2015 on a healthy note,” said VECCI Chief Executive Mark Stone.

In an encouraging sign for business, sales performance improved for one in three (35 per cent) surveyed businesses during the September quarter. This is an improvement on the June 2015 quarter, when sales trends were comparatively flat across surveyed industries.

Sales are expected to continue to improve in the lead up to Christmas, with 34 per cent of respondents anticipating growth in the December 2015 quarter.

The VECCI survey of nearly 450 businesses across seven major industry sectors also found that selling prices are expected to increase, with almost one in five (17 per cent) surveyed businesses predicting a rise. The positive sales and selling price outlook indicates business expects stronger consumer spending over the next three months.

In a further sign of confidence, following a sharp decline in employment levels last quarter, almost one in five (17 per cent) surveyed businesses reported a rise in employment during the September quarter and a similar share forecast further jobs growth in coming months.

“It is positive to see both business trading conditions and confidence on the rise, however the underlying soft job market and intense international competition remain headwinds to a sustainable lift in business performance,” said Mr Stone.

“In this environment, policy makers must do what they can to ensure business confidence remains positive. Action is needed to lower business costs and encourage job creation.”

The Victorian Employers Chamber of Commerce and Industry (VECCI), established in 1851, is the most influential business organisation in Victoria, informing and servicing more than 15,000 members, customers and clients around the state.

vecci.org.au

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