Taxes charged on superannuation contributions and earnings should be left as they currently stand with the Federal Government instead considering providing tax-free thresholds for retirement benefits with low personal tax rates applied beyond to income those levels.
At the same time recognition should be given to the unique and complex nature of the Australian superannuation system with tax concessions throughout the system capable of refinement but only over long transition periods.
The statements were made by the SMSF Association (SMSFA) in its submission to the Federal Government’s Tax White Paper process with Association chief executive, Andrea Slattery, stating “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”.
“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.
