Government warned on superannuation tax fallout
Little more than a week out from the Federal Budget, both the industry and the Federal Opposition have continued to warn the Government against further tinkering with superannuation.
The warnings have come as the Government have all but confirmed the Budget measure to increase the 15 per cent tax on earnings inside super for higher income earners, with the only area of doubt being at what point the higher tax will cut in.
Specialist global bond manager PIMCO has emerged as the latest critic of the Government, saying any move to alter the tax treatment of fund earnings inside super would have a negative impact on the retirement savings of all Australians by further distorting asset allocations.
Pointing specifically to a likely Budget move to increase the 15 per cent tax on earnings inside super for higher income earners, Pimco said this would have the side effect of making equities more attractive than lower risk income products such as bonds or term deposits.
Pimco's head of global wealth management Peter Dorrian said with an ageing population and a compulsory superannuation system already biased towards Australian equities, increasing the tax on fund earnings would likely encourage members to try to reduce their overall tax imposition by increasing exposure to high yielding, fully-franked shares.
The Opposition spokesman on financial services, Senator Mathias Cormann, warned the Government against seeking to tax superannuation savers as part of a broader Government tax grab and therefore undermining the objective of self-funded retirement.
"All these additional Labor Party taxes on superannuation are completely counterproductive," he said. "They make it harder for people to achieve self-funded retirement to help reduce the burden on the public purse."
The criticisms of Pimco and the opposition follow on from broader superannuation warnings earlier this month that continued tinkering with superannuation would only serve to undermine consumer confidence in superannuation.
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