Financial services and business groups have responded favourably to the Federal Government’s tax reform agenda, singling out an increase in superannuation contributions for particular praise.

The Henry Tax review was released yesterday, and while only four of the review’s 138 recommendations are being immediately implemented, the financial services sector is initially pleased with Prime Minister Kevin Rudd’s proposals.

The Superannuation Guarantee increase from 9% to 12% is “the most significant reform of superannuation in a generation”, according to the Investment and Financial Services Association.

CEO John Brogden says the Government’s $500 contribution to low-income earners – effectively cutting super contributions tax to zero – is also a welcome addition.

“Australians will face retirement with greater security and confidence,” Mr Brogden said. “The ability to contribute to super up to the age of 75 is a serious incentive for Australians to keep working past the traditional [retirement] age.”

The Financial Planning Association also supports the superannuation reform.

“Encouraging more people into super and effective savings is a strong way to ensure a brighter long-term financial future,” Acting CEO Deen Sanders said.

However, there are criticisms. The Association of Financial Advisers (AFA) is broadly satisfied with the report and the Government’s response, but says it’s disappointed the Government has not yet considered making the cost of financial advice tax-deductible.

“If Australians are to make the most of their retirement savings they are going to need quality financial advice,” AFA CEO 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.”

The Institute of Actuaries of Australia also wants more work to be done to tackle problems around Australia’s ageing population.

CEO Melinda Howes says while some of the changes will “mean Australians have a better chance of retiring with a comfortable standard of living”, the “biggest missing piece” is the Government’s response around longevity and retirement incomes.  According to the institute there is a chance that mortality rates could improve faster than anticipated.

“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,” she said.