Rising cost of living expenses has caused a flow-on effect to retirement funds, increasing the amount needed to retire comfortably.
The Association of Superannuation Funds of Australia revised its super targets in March 2023 to reflect rising inflation.
The Australian Bureau of Statistics this week reported the annual inflation rate had eased slightly to 7 per cent.
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ASFA considers an individual as able to retire comfortably if they have an annual retirement income of $49,462.
With inflation, the ASFA Retirement Standard increased the lump sum required to deliver that income.
A retiree now needs $595,000 in their super balance to reach that mark.
For a couple, that figure increases to $600,000.
It comes as Treasury documents reveal a 20-year-old earning an average wage — about $90,000 a year in today’s terms — is expected to be impacted by federal government changes to superannuation tax concessions, but only by the time they reach their early sixties.
New Treasury documents reveal most people are not forecast to end up with super balances above $3 million when they retire, which is when the changes would kick in.
Under the tweaks promised by the federal government, starting from 2025/26, the concessional tax rate applied to future earnings for balances above $3m will be 30 per cent, rather than 15 per cent.
When introduced, the changes will only affect about 80,000 of people — around 0.5 per cent.
But the failure to index the $3m threshold to inflation has raised concerns from the opposition that a much bigger cohort will be hit by the higher tax rate in the future.
The Treasury documents, tabled under a Senate order for production of documents moved by Liberal senator Simon Birmingham, found only the top 10 per cent of retiring earners will have a super balance of $3m or more in 30 years’ time.
The Treasury analysis includes a range of case studies to illustrate the impact of the altered super tax concessions.
A 35-year-old with a balance of $75,000 earning an average wage of $90,000 is not expected to have a balance above $3m by the time they retire, nor is a 50-year-old earning the same amount with a balance of $200,000.
The analysis also notes the average wage of $90,000 is around 15 per cent higher than the median wage, meaning Treasury’s example subjects are earning more than what 50 per cent of the broader population does.
Treasurer Jim Chalmers said the changes had broad public support because they were “modest and sensible”.
“When Australians are doing it tough, Labor’s highest priority is targeted cost of living relief in a more responsible budget — the Liberals’ highest priority is bigger tax breaks for people who already have tens of millions in super,” he said.
The May 9 budget will include the change to superannuation tax breaks to apply from 2025/26.
Opposition Leader Peter Dutton has promised to repeal the changes should the coalition win the next election.
– with AAP
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