Principal at Paramount Wealth Management, Wayne Leggett, believes that instead of concessional contributions being tax deductible, they should be subject to a tax rebate.
“This would immediately negate the disproportionate taxation advantage afforded to higher earners and make the tax benefit of a concessional contribution the same per dollar for every contributor, irrespective of their marginal tax rate,” he told SMSF Adviser’s sister publication InvestorDaily.
Speaking to SMSF Adviser, Mr Leggett said he believes this is one of the few proposals that would legitimately “level the playing field” for superannuation tax concessions.
“It just seems to be common sense that if you have an issue with the fact that you’re giving excessive tax concessions to those that need it the least, then it seems fairly logical that if it wasn’t a deduction but a rebate then it’s not disproportionate, it’s favouring everyone equally,” he said.
Mr Leggett said he will make his local federal MP aware of the proposal.
“I will avail myself of the opportunity to say to him, if there’s anything else being mooted in terms of super, you don’t want any change that is seen as negative. It will just undermine people’s preparedness to contribute to super, and that’s the last thing you need,” Mr Leggett said.
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[quote name=”Ralph”][quote name=”DavidL”]
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They are not the same tax break. If you make a $10,000 salary sacrifice when your TI is $70K you save $3,450 in tax. I you do so on a TI of $200K the tax saving is $4,900.
Perhaps everyone should get a flat 35% rebate on the contribution.[/quote]
Davids Correct and you are wrong, you have to think in terms of what percentage of their tax bill do they save not in dollar terms didn’t you study basic finance.
When my clients ask me how much money there super fund has generated that year they don’t want to know in dollar terms that tells them nothing they want to know the percentage return
So were going to make concessional contributions not deductible, for who. An employer makes the superannuation contribution for its employees and gets the tax deduction.
So tell me how this rebate system is going to work so that it isn’t so convoluted and complex that it costs employers, particularly small businesses a lot of time and money to make it work. After all super is a legislated cost that entitles employers to a tax deduction.
And this guy runs a financial planning business giving financial advice to people.
Well this idea has been floated before but is quite inconsistent with income tax design principles if superannuation is seen as a form of forward averaging of lifetime labour income.
People should read John Stuart Mill and William Vickrey. Studying a subject over many years is usually seen as a useful prelude to contributing to a debate.
David is one the money Ralph, in terms of who’s getting the better deal.
The person on $200K is earning 2.85 times the amount of someone on $70K, but is paying 4.24 times the tax. The person on $200K is paying as much in tax as the other person is earning! And you think they aren’t entitled to the existing arrangements??
[quote name=”Ralph[/quote]
They are not the same tax break. If you make a $10,000 salary sacrifice when your TI is $70K you save $3,450 in tax. I you do so on a TI of $200K the tax saving is $4,900.
[/quote]
But Ralph, that’s the way the progressive tax system works. You save more if you pay more in the first place. But, really, the dollar amount only becomes meaningful when you take it as a % of the total tax paid.
Someone on $70k pays tax of roughly $14k, so that $3,450 saving equals 25% of their total tax bill.
Compare that with someone on $200k – their tax bill is around $63k, so the $4,900 saving represents only 7.5% of their total tax bill.
Who’s getting the better deal now? Seems to me the “inequality” equation has shifted the other way. Makes a joke of the whole argument, doesn’t it!?
[quote name=”DavidL”]The same tax breaks on superannuation are available to EVERY taxpayer in the country. Just because some are better placed to utilise them doesn’t make it inequitable.
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They are not the same tax break. If you make a $10,000 salary sacrifice when your TI is $70K you save $3,450 in tax. I you do so on a TI of $200K the tax saving is $4,900.
Perhaps everyone should get a flat 35% rebate on the contribution.
This is in fact a very bad proposal. On the one hand we are saying we need more people to put more money into super to provide for their own retirement and on the other we have people saying we are going to REDUCE the incentive to do so! Presumably this rebate will kick in at a level less than top tax bracket. Try now getting a successful 30 year old to put money into super knowing it will be locked up for decades even when he/she might save up to 49%. If we halve that benefit NO young person will put any extra into super. That was suppose to be the point of super!!
Likewise if you lifted the rebate for low income people to put money into super it won’t work. They DONT have any spare income and if they did they are far more likely to use as a deposit on a house to stop renting. They don’t put more money into super now NOT because they can’t save 49% its because they don’t have any spare cash, that is what poor means!!
Does anyone ever stop and think that “the disproportionate taxation advantage afforded to higher earners” referred to by Mr Leggett is a direct result of the disproportionately high amount of tax these high earners PAY in the first place?
The same tax breaks on superannuation are available to EVERY taxpayer in the country. Just because some are better placed to utilise them doesn’t make it inequitable.
This whole argument is becoming very tiresome. Particularly when it’s obvious the whole thing is merely a smokescreen to draw attention away from the financial incompetence of our political masters.
The population is getting older. Govt pensions will diminish due to lack of tax. Lift all restrictions for savings and have the savings given a tax break of $1.00 for $1.00. So if you contribute $100 000.00 to your Super then you have a $100 000.00 tax deduction. On withdrawal you pay tax at your normal rate of tax.