The Henry review has received backlash from the financial services sector, as industry bodies vent their disappointment that the government failed to properly address key areas of necessary reform.
The lack of concessions on insurance products and the fact the government did not take up Henry’s recommendation to abolish all specific taxes on insurance products was a big disappointment for the industry and the Australian public, according to Deloitte.
“The real disappointment is that Henry recognised how Australian insurance taxes are leading to underinsurance or non-insurance, but the government has not made a response to Henry’s recommendation,” Deloitte insurance tax partner Phil Lee said.
“It seems they only barely acknowledged that insurance taxes are among the most inefficient taxes levied in Australia.
“The reality is that the government has neither strengthened, simplified, nor made the insurance industry fairer. We believe it is a real missed opportunity.”
Furthermore, Deloitte believes the superannuation guarantee contribution rate increase to 12 per cent by 2020 will be inadequate for supporting Australians in retirement and falls short of business expectations.
Meanwhile, the Institute of Actuaries of Australia (the institute) said the biggest missing link was the government’s response around longevity risk and retirement incomes.
With a chance that mortality rates could improve faster than anticipated, the institute said more work must be done in the short to medium term to tackle problems around Australia’s ageing population and the industry should be allowed to innovate to provide annuity-style products.
“With so many disparate factors influencing our longevity, past data may not be a good guide to future improvements in mortality, so we may be living even longer with the same amount of superannuation,” the institute’s chief executive Melinda Howes said.
“The institute strongly believes government should let the private market provide annuity products for younger retirees and focus their efforts on being the longevity insurer for Australia’s older retirees aged 75 plus.”
Furthermore, the Association of Financial Advisers (AFA) was disappointed the government missed the opportunity to address tax deductibility of financial advice.
“If Australians are to make the most of their retirement savings they are going to need quality financial advice,” AFA chief executive Richard Klipin said.
“Tax deductibility would make access to advice – which will, in the future, be advice people will have to pay a fee for – much more affordable.
“Quality advice on superannuation and increased levels of insurance holds the key to solving some of the very serious problems the government faces with an ageing population.”
