A road map to greater national savings and increased budget revenue

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Changes need to be made to Australia’s financial system to help address the nation’s debt challenge, increase national savings and encourage personal responsibility, the Friendly Societies of Australia (FSA) says.

The FSA lodged its submission to the Financial System Inquiry on behalf of Friendly Societies across Australia that help people plan for future life-events through savings, investment and insurance products.

FSA President Matt Walsh said the recommendations in the submission were consistent with the Federal Treasurer’s approach to end the age of entitlement.

“Our recommendations respond to the challenges of a structural deficit and will help manage the growing reliance on government funded social welfare,” Mr Walsh said.

“We are an industry founded on the principles of self-sufficiency, and our submission seeks to balance the scales to remove the impediments to self-reliance that exist in the taxation system today.

“The measures we seek will also boost Australia’s long term education outcomes and increase the skill base of our country’s workforce, through encouraging private savings dedicated to education.”

The FSA had made three key recommendations:

  • Tax changes on insurance bonds to increase private savings and enable individuals to better prepare for life-events;
  • A government co-contribution scheme for friendly society education savings plans for Australian families, to assist and encourage this form of savings;
  • Restoring the tax-free threshold on taxable benefits paid to minors under friendly society education savings plans, which are currently taxed at punitive rates as high as 66%.

The FSA said these changes will address tax concessions that currently unfairly favour other products and put friendly societies at a competitive disadvantage.

“There is an excessive focus on superannuation for retirement savings in our taxation system which ignores the reality of the broader needs of the Australian population, and some material gaps in encouraging self-sufficiency for other major life events,” Mr Walsh said.

“Promoting measures to encourage Australians to save for their education, health, aged care and major life events will take the pressure off Government coffers and result in more diversified and robust financial resources to support families across their entire lives.

“The changes called for today will have positive economic benefits for Australian families and the long-term budget bottom line,” Mr Walsh said.

This submission also proposes a range of policy options for consideration that FSA believes can improve the regulatory framework under which friendly societies operate, in particular greater oversight and accountability on regulators to ensure their regulatory approach achieves intended outcomes, and that resources are not being diverted from productive activities that underpin economic growth.

The FSA is the industry association that represents 10 of Australia’s 12 APRA-registered friendly societies. The full submission is available at http://www.customerownedbanking.asn.au/images/stories/submissions/2014/20140331%20FSA%20sub%20to%20FSI.pdf

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For more information please contact:
Matt Walsh – Phone: 08 8236 4706 or 0418 113 878