Changing current superannuation taxation laws would increase the complexity of the sector and reduce incentives to save which can be boosted by leaving superannuation as it stands, applying new low personal tax rates, and tax-free thresholds for those in retirement.
The suggestion has been made by the SMSF Association (SMSFA) in its submission to the Federal Government’s Tax White Paper process where it has claimed “a ‘light tax’ on benefits paid to the taxpayer that exceed a ‘generous’ tax-free threshold” was its preferred method of boosting the equity of superannuation”.
Association chief executive, Andrea Slattery, said the proposed system would provide recognition of the unique and complex nature of the Australian superannuation system where tax concessions, which have been applied throughout the system, were capable of refinement but only over long transition periods and not for revenue raising purposes.
“We believe this proposal allows people to build adequate superannuation balances efficiently and is preferable to a more complex tax on earnings or high account balances, both of which are costly and inefficient,” Slattery said.
“Increasing taxes on contributions and earnings are not only complex, but reduce the incentive to contribute to and maintain savings in superannuation, as well as reducing the compounding effect of investments over time, reducing superannuation balances.”
Slattery said the SMSFA proposal was much simpler to implement and would pare back tax arrangements that exceed the objectives of superannuation to create self-sufficient and self-funded retirements for fund members.
“We believe that this strikes the right balance between providing people with appropriate incentives to sacrifice their current income for long-term retirement savings and ensuring that superannuation is fair and sustainable,” Slattery said.
SMSFA also stressed its opposition to superannuation being used for non-retirement income purposes stating “we are emphatic that superannuation tax policy should not be used as an instrument to raise government revenue to meet fiscal shortfalls in the short to medium-term”.
“Superannuation was established to be Australia’s primary retirement savings vehicle, as well as a national pool of savings, and as such should not be considered a source of government revenue,” Slattery said.
