NATIONAL resource industry employer group, AMMA, congratulates the Australian Government and Opposition on reaching an agreement that will underpin the rapid commencement and full implementation of the China-Australia Free Trade Agreement (ChAFTA), to deliver growth and jobs.

“Australia’s resource industry is pleased the Government and Opposition have reached an agreement on implementing ChAFTA. This free trade deal is vital for the future of 23 million Australians,” say AMMA chief executive Steve Knott.

“The ChAFTA will come into force at a time when Australia’s resource industry must up the ante on its international competitiveness and grasp opportunities that would otherwise go to emerging resource destinations.

“As the global resource marketplace becomes even more competitive, this deal will bring the Australian and Chinese economies closer together, resulting in greater investment, growth and job opportunities for Australians.

“Tangible benefits will be felt through the abolishing and phasing out of tariffs on resource commodities vital to building our economy over the coming decades, including coal, liquefied natural gas, iron ore and gold.

“Securing preferred trading status with our largest trading partner, a country that represents 32% of all global GDP growth and about 30% of global capital expenditures, is good for resource exporters and also for Australia’s world-leading resource technologies and service providers.”

Once ratified, the ChAFTA will mark the third deal secured by the Australian Government with a significant Asian trading nation over the past 12 months, and follows the Trans Pacific Partnership recently reached with 11 other countries.

“We congratulate trade minister Andrew Robb for his leadership in achieving the trifecta for free trade with Australia's key partners in Japan, South Korea and now China,” Mr Knott says.

“Coupled with the Trans Pacific Partnership, these exciting arrangements will open new doors for Australia's economic growth and drive our national prosperity into the future.”

www.amma.org.au

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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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