The Association of Superannuation Funds of Australia’s (ASFA’s) report on superannuation and high account balances found that there are more than 200,000 people who have superannuation account balances in excess of $1 million, with around 70,000 with balances in excess of $2.5 million.
A total of 24,000 SMSF members in the pension phase with balances in excess of $2 million received around $5.2 billion in tax-free income stream payments, the report stated, or an average of around $216,000.
This is compared with the 232,000 SMSF members with balances of less than $1 million who received a total of $8.9 billion, or an average of approximately $38,000.
“A person who retires with a very high superannuation account balance is likely to have sufficient capital to draw an income stream that will allow them to live comfortably, even if they face medical or care expenses in the future or live considerably longer than expected,” said ASFA chief executive Pauline Vamos.
“Above this level, the opportunity for people to use the concessionally-taxed super system for estate planning purposes increases.
“It is therefore appropriate to question whether or not the same tax concessions that are applied to lower balances should equally be applied to individuals with very high levels of super,” Ms Vamos said.
“It also poses problems when it comes to intergenerational equity, and whether it is fair for younger generations of taxpayers to be funding the tax concessions of older high net worth individuals.”
I bet ASFA would not be saying this if all this money was still in a retail fund.
Further, there is no reference here of all the members in retail and industry funds that are receiving tax free income.
Okay not all these members will have large balances but there will be large accounts there.
I believe most people agree, including many with several $m in super. The question is how is it done. The issue is any changes affect the computer systems for every super fund (SMSF, industry, retail, corporate, Government). Every advisor needs to know how new rules work. The Government needs people and a system to collect the tax. So we target 70,000 people but it impacts the other 99% of people with super balances. That was the catch with Liberals Surcharge and Labors $100k income a year tax free proposal.
So we need a simple solution. Maybe reintroduce tax on withdrawals for those over 60. Possibly have a higher rebate or exempt the first $100k a year.
Does ASFA or anyone have a simple way of targeting the issue? Complex solutions will cost everyone more than the tax raised.
[quote]”It also poses problems when it comes to intergenerational equity, and whether it is fair for younger generations of taxpayers to be funding the tax concessions of older high net worth individuals.”[/quote]
As opposed to the taxes of these “high net worth individuals” funding pension payments to those without sufficient superannuation savings? I guess “fairness” is a subjective concept.
Envy is never a good guide to social or economic policy.
I once shocked a Private Secretary to an Australian Federal Treasurer by saying so to his face when they were seeking my Senator’s vote. If I recall correctly, the words I used were “Actually, this office regards envy as a sin, a most grievous sin and one which is destroying Australian society”.
Needless to say, my Senator, Brian Harradine, was not in the least embarrassed that I said this. He was a decent, old fashioned, totally moral and cultured but humble working class man who cared more for people than power – which he shrank from like poison or the Ring of Power.
He now rests in peace with a more just and merciful Ruler.