The methodology used to measure superannuation tax concessions is "fatally flawed", according to Andrea Slattery, CEO of the SMSF Professionals' Association of Australia (SPAA).
Indeed for Slattery, it misinforms the debate around retirement income policy.
"Measuring the concessions as tax expenditure using a comprehensive income benchmark is misleading and biased against concessions, because any derivation from income being taxed at a taxpayer's marginal tax rate is regarded as a cost to government revenue," she said.
"This ignores superannuation's primary purpose, providing retirement income and decreasing reliance on the Government for retirement income support."
Slattery said that while the current methodology was "theoretically correct" under a comprehensive income benchmark, it failed to include future government savings from reduced spending on the age pension, or tax revenue gained from earnings of superannuation investments or benefits taxed on withdrawal.
"SPAA believes this skews the debate regarding the level of concessions and the appropriateness of concessional taxation of superannuation contributions as an incentive for people to save for their retirement," she said.
According to Slattery, the short-term budget forecast figures that used four-year revenue estimates for changes to the concessions, and a similar focus of the Tax Expenditure Statements on single income years, were the wrong way to assess superannuation concessions.
"These short-term costings create myopic views of the superannuation tax concessions that often support arguments to reduce the concessions," she said. "Instead, what are needed are longer-term forecasts to assess the proper policy settings for the tax concessions."
Slattery said that SPAA recommended that an expenditure tax benchmark be used to estimate the cost of the superannuation tax concessions.
"It would be more appropriate for estimating tax concessions, as an expenditure tax benchmark has a more appropriate focus on the provision and taxation of superannuation benefits rather than the tax forgone for the concessions," she said.
