Mercer’s Managing Director, Australia & New Zealand, David Anderson, said continual changes to superannuation will unfortunately create a wave of uncertainty, confirming the commonly held view that superannuation is an irresistible honey pot.
“There is a risk that further complicating and continually changing the rules in superannuation will reduce investor confidence in super and that would be a most unfortunate outcome,” Mr Anderson said.
“If Australia’s high income earners are not encouraged to engage in the superannuation system, this may have a flow-on effect to middle income earners who would be influenced by the actions of their higher earning peers and therefore, align their investment strategies away from superannuation.
“Despite the changes announced in the Federal Budget, superannuation remains attractive for all Australians. It is a very effective strategy for building wealth,” he added.
“Even with a doubling of the rate of contributions tax for the highest income earners, the rate is still 16.5% less than the personal tax rate which would be applicable to assessable income. Further, the tax rate on your super investment income remains at a low 15%,” Mr Anderson said.
Importantly, high income earners will need to manage their remuneration packages carefully, noting the effects of the removal of the private health insurance rebate, the additional contributions tax, and the concessional contributions cap. All these changes come into effect from 1 July 2012.
“Professional financial advice becomes an imperative for high income earners and anyone approaching retirement noting the deferral of the additional $25,000 concessional contribution amount,” Mr Anderson said.
Employers should also review their remuneration policies and practices. Changes to ETPs, concessional caps and new rules for temporary international executives means that employers will need help in structuring and designing appropriate packages.
Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @MercerAU @MercerInsights