The Financial Services Council (FSC) has warned the Federal Government that superannuation changes do not represent credible tax reform.
In a damning assessment of the policy speculation which has occurred around superannuation this year, FSC chief executive, Sally Loane last week condemned the rumours which had occurred around the targeting of tax concessions and the application of Capital Gains Tax (CGT).
In doing so, she said that rather than looking at superannuation changes as a means of pursuing tax reform, the Government needed to look at the actual tax mix.
Further, she said that the days of people being able to use superannuation as an estate planning tool were over.
“Let’s be very clear, the gates have long been closed to stop people stuffing millions into super,” Loane said.
“Super was never designed as an intergenerational wealth transfer vehicle and should not be used as such.”
“We have consistently said that in the effort to design a better retirement system, the tax treatment of superannuation should be on the table — but that it must be considered in the context of a full retirement income review that includes the Superannuation Guarantee rate, aged care affordability, the age pension entitlement and the assets and income test, as well as access ages for the pension, and for super,” she said. “Super must not be raided to fill Budget holes or fund pet projects.”
The FSC chief executive then referred to PwC modelling on several progressive tax options being debated in the public arena and said the results were striking with the policy given the greatest attention at the time — an option to apply a 15 per cent rebate on marginal tax rates — having been shown to undermine the retirement outcomes for middle and lower Australia — people earning $80,000 or lower, that is, 80 per cent of Australians.
“The FSC does not support the 15 per cent rebate model. This proposal would send the retirement savings of middle Australia backwards and condemn them to higher levels of reliance on the age pension,” she said. “The only option which did not harm the savings of middle Australia was when the superannuation guarantee rate was raised to 12 per cent, and any discount on the marginal tax rate was at least 20 per cent.”
“If the Government does have plans to change super, we urge it to find options that increase, not deplete, savings for middle Australia and crucially, do not add implementation costs onto super funds and therefore upward pressure on fees,” Loane said.
