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Administrators brace for more complexity
Australia's major superannuation fund administrators have confirmed they will be closely monitoring the fine detail emerging from today's Federal Budget to enable them to start preparing for expected changes to the taxation arrangements around superannuation.
The Treasurer, Wayne Swan, is expected to confirm pre-Budget discussion that the Government will be increasing the superannuation taxation arrangements for higher income earners, specifically those earning more than $300,000 a year.
However, Towers Watson has warned that such a move risks creating further taxation complexity and superannuation uncertainty.
Towers Watson Australia managing director Andrew Boal has pointed to the expected increases in superannuation taxation arrangements for higher income earners, and warned that the Government risks breaching its own test of achieving "simple, fair and consistent outcomes".
He said the expected Budget measure would see six different effective rates of concessional tax treatment applying to various income ranges, resulting in greater complexity within the system.
"This will create an administrative nightmare for funds," Boal said.
Further, the Towers Watson head said administration of the expected new tax regime should fall to the Australian Taxation Office rather than be implemented by individual funds.
Boal said the superannuation industry remembered only too well what happened the last time the Government attempted to tax superannuation for high income earners for the "superannuation surcharge".
"We need to learn some lessons for the headaches it created for super funds," he said.
Boal said surveys in the Australian superannuation industry had continually found that fund members already thought super was complex and difficult.
"Perception is reality and this move will exacerbate the situation," Boal said.
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