The Federal Government has been urged to review the process of assessing concessional superannuation contributions in circumstances where existing arrangements are complicated and don’t work.
Accounting and financial services firm, BDO has used its pre-Budget submission to the Treasury to point out the shortcoming of the existing superannuation taxation regime, and to also call for the replacement of annual contribution caps with lifetime contribution caps based on numbers which are “meaningful to allow a person and their family to be self-sufficient in retirement”.
The BDO submission pointed to research over a number of years which it said showed that taxpayers do not appreciate the continual ‘tinkering’ with the superannuation tax system
It said that taxpayers also perceived that the current contribution caps arrangements did not appropriately incentivise them to save for their own retirement.
“In particular, they are concerned that the contributions cap restricts them from saving for their retirement during the years in which such saving is financially affordable for them,” the submission said. “Much of the policy of the superannuation system should be that taxpayers save for their retirement progressively during the years that they are earning income, [but] it is simply not affordable for the vast majority of the taxpaying community to do so.”
“In this regard, we submit that the level at which the concessional contributions cap is set should be reviewed in light of evidence (either to be collected or, if already collected, to be made public) on the adequacy of such savings for a range of scenarios having regard to the effect of capping,” the submission said.
The BDO submission also noted that the interaction of the superannuation guarantee legislation and the concessional superannuation deduction capping measures meant that certain highly paid workers who were employed by two unrelated employers were subject to excess contributions tax which they could not cannot avoid.
“For example, a contract CFO paid $150,000 per year by each of two companies will incur an excess contributions tax liability based solely upon the required superannuation guarantee contributions from each of those companies,” it said. “The imposition of a punitive tax that is unable to be avoided reduces confidence in the integrity of the system. In our view this anomaly should be fixed.”
So BDO suggest tinkering with the existing superannuation tax regime, and at the same time, highlight that taxpayers don’t appreciate continual tinkering with the existing superannuation tax regime.