The Federal Government has been criticised for not scrapping the superannuation surcharge immediately on Budget night, and for not affording the same generosity with its tax cuts to super funds as it did to individuals’ pay packets.
The criticisms came from prominent industry commentator Barbara Smith, who is the technical services manager of self-managed superannuation services provider Online Super and a past technical director at Taxpayer Australia and Superannuation Australia.
She said that although she was happy with the scrapping of the surcharge, the delay of its abolition until July 1, 2005, would hurt both employers and employees, especially when a large bulk of super is contributed at the end of the financial year.
“[Scrapping the surcharge from July 1] will not cost the Government one cent until 2006-07 because the surcharge will still be payable on the superannuation contribution and certain employment related termination payments paid before July 1, 2005. That means hapless taxpayers will still be coughing up during 2005-06 for this year’s surcharge tax slug,” Smith said.
“Employers will find themselves between a rock and a hard place when employees who will cop a surcharge of up to 12.5 per cent on their super this year ask for their super contributions to be deferred until after June 30 but their employer wants the tax deductions this year.”
When it was introduced in 1996, the highly unpopular superannuation surcharge was intended to increase taxes for people on higher incomes. But many lower income earners who made large one-off payments to superannuation as they approached retirement also had to pay it.
“Contrary to popular belief, these surcharges are not just a slug on the rich. They often catch people who have never been high income earners in the year they retire,” Smith said.
Smith also slammed the Government for not cutting super fund taxes, complaining that since the introduction of the GST, companies and individuals had received tax cuts, while superannuation had not.
“There needs to be an immediate reduction in the tax rate on superannuation contributions and the super funds themselves, so they can grow to a size which will generate a sufficient retirement income stream,” Smith said.
