In August 2011, the Australian Centre for Financial Studies (ACFS) released a research report Private Savings: The Role of Life Event Savings Products commissioned on behalf of the FSA. The ACFS is a not-for-profit consortium of academia and industry, specialising in leading edge finance and investment research.
The research showed that individuals face a number of challenges over their lifetime, such as financing education, housing, health and retirement, for which many are unprepared. The report noted that the financial challenges that these life events create can be met, in part, through an adequate, sustainable savings pool or in other cases, government support. Conversely, a shortfall in these areas will directly impact the range of opportunities available to an individual over their lifetime.
The report concluded that the insurance bond framework, offered by Australian friendly societies, is the best mechanism to prevent medium-term savings shortfalls. However there is a disincentive for low to middle income earners to use these products.
The FSA has developed a policy options agenda to address this disincentive that focuses on the following priority issues:
- a reduction in the tax rate applied to friendly society benefit funds from 30% to 20% to address the lack of neutrality in the tax system between IBs and superannuation;
- the introduction of an education savings co-contribution scheme for low and middle income Australian families to help stimulate this form of savings; and
- the immediate restoration of an appropriate tax-free threshold to earnings paid to minors under scholarship plans, which are currently taxed at punitive rates as high as 66 per cent.
As part of the ongoing advocacy efforts, COBA and the FSA met with Treasury officials in November 2013 to advance this policy agenda. In late November 2013, the FSA lodged this submission with the National Commission of Audit.
Related Submissions & Documents
- Media Release - Age and Service Pension Funeral Bond exemption limit is now $12,500 - 30 June 2016
- Submission to Treasury - Objective of Superannuation – Discussion Paper 2016 - 5 April 2016
- Submission to Treasury - 2016-17 Budget Priorities - A strategy to help Australian families work, save and invest - 5 February 2016
- Submission to Senate Economics References Committee - Inquiry into cooperative, mutual and member-owned firms - 1 July 2015
- Submission to Treasury - 2015 ‘Re:think’ Tax Review - A Road Map to Greater National Savings and Increased Budget Revenue - 1 June 2015
- Submission to Treasury - 2015-16 Pre-Budget submission - Strategies to enhance education opportunities through greater self-reliance by Australia families - 6 February 2015
- Submission - Second FSA Submission to FSI - 26 August 2014
- Media Release - A Road Map to Greater National Savings and Increased Budget Revenue - 1 April 2014
- Submission to the Financial System Inquiry - A Road Map to Greater National Savings and Increased Budget Revenue - 31 March 2014
- Submission to Treasury - 2014-15 Budget Priorities - increasing life-event savings and introducing positive tax revenue measures - 4 February 2014
- Submission to National Commission of Audit - 26 November 2013
- Letter to Liberal Party - 2013 Federal Election FSA Policy Options - 13 August 2013
- Letter to ALP - 2013 Federal Election FSA Policy Options - 13 August 2013
- Submission to Treasury - 2013-14 Budget Priorities - Policy Options for Increasing Life Event Savings - 31 January 2013
For more information in relation to friendly societies should contact:
02 8035 8447