The introduction of the Tax Law Amendments (Simplified Superannuation) Bill into Federal Parliament has drawn mixed reactions from the financial services industry.
The reforms aim to eliminate the complex range of tax arrangements that apply to superannuation and significantly reduce the number of pages of superannuation law in the income tax assessment Acts.
Welcoming the introduction, the Financial Services Institute of Australasia (IFSA) congratulated the Government and Treasury, particularly for the consultation process that led to the legislation’s development.
“This legislation addresses many of the issues and concerns raised by IFSA during the consultation process and will simplify the current complex tax arrangements and restrictions that apply to superannuation benefits,” IFSA chief executive Richard Gilbert said.
Also welcoming the changes was Macquarie Margin Lending, which focused on the benefits of the legislative reforms governing the taxation of capital protected products.
“Macquarie Margin Lending has worked closely with the Australian Taxation Office and Treasury, discussing the deductibility status of capital protected products to ensure the best possible result for our advisers and their clients,” head of sales and marketing Peter van der Westhuyzen said.
“For most investors who take out capital protected loans from the beginning of the next financial year, this proposed legislation provides greater certainty and could potentially reduce the after-tax cost of investments compared to the existing treatment under the Interim Methodology.”
However, Peter Promnitz, chief executive of Mercer, said that while the changes were ultimately positive, there were still a number of significant penalties that could erode a member’s superannuation contributions.
Mercer warned that individuals tempted to exceed the contribution limits could face tax of 93 per cent on excessive contributions, and even more (possibly 124.5 per cent) if they had not supplied their Tax File Number as well.
“While the catchcry of the new regime has proclaimed a ‘simpler super’, the fact is, planning for retirement remains complex and individuals will still need to obtain appropriate advice in order to maximise the opportunities available to them,” Promnitz said.
“Likewise, there is a considerable risk in the short timeframe for implementation that there will be considerable strain placed on superannuation funds, financial advisers and even employers.”
On a more positive note, BT Financial Group believes the reforms will bring about a monumental shift in the way Australians plan for their retirement, leading to a greater engagement and encouraging more people to save.
BT chief executive Rob Coombe said the changes would completely revolutionise investors’ view of super.
“It’s a fantastic reform — Australia is leading the world in addressing the issues around an ageing population,” he said.
