Insurance in super
KPMG is concerned that the Budget announcements surrounding the removal of default insurance in super for people under the age of 25 will damage the overall system for relatively little benefit.
KPMG’s report for the Insurance in Super Working Group last September showed overall, the default group insurance in super system produces substantial benefits both for members and Australia as a whole.
Adam Gee, KPMG Superannuation Advisory Partner said: “Our modelling showed that the current system facilitates greater insurance coverage for a larger part of the population, which helps to reduce Australia’s long-standing under insurance issue. Many more people are covered, and to a much greater degree, than if they relied on government support. Death benefits also allow the surviving spouse to carry on working rather than having to leave the workforce and look after children – an important societal and economic benefit.”
Adam Gee added: “The impact of the removal of default cover for under 25’s on the remaining insured members in superannuation funds must also be considered. As superannuation insurance is a provided via a ‘group’ pooling arrangement, the removal of younger lives can only increase the overall risk of the whole insurance pool. As such, this removal is likely to result in an increase in insurance premiums for the remaining members, which is a surely not the intended outcome”.
As funds continue to grapple with the implementation of the Insurance in Superannuation Voluntary Code of Practice and the impact that this will have on the default insurance provided through superannuation for many Australians, the Budget announcements are likely to add further complexity and will have broader ramifications than appear to have been considered.
Research & Development
David Gelb, KPMG National Partner, R&D Incentive, said:
Australia’s destination as a desirable location to invest in R&D will be extinguished if these austerity measures are legislated.
“Many Australian companies will have their present level of R&D claims more than halved as a result of the Budget action tonight.The proposed reduction of R&D tax incentives for many innovative companies may significantly impact companies with a turnover of $20m or more. This may affect manufacturing, agribusiness and other industries.
A key problem is that although the changes are only applied to future claims, projects have already begun with the R&D credits baked in and implementing changes now will inevitably have a retrospective effect.
Such companies may be forced to consider relocating their R&D to countries with more attractive incentives, such as Singapore and New Zealand.