With the national tax reform debate heating up, there have been calls for superannuation concessions afforded to high-income earners to be examined.
Recently, former ATO senior director Mark Chapman told SMSF Adviser there are “very generous” tax breaks for high-income earners.
“I think the thing is that for taxpayers who are earning the highest level, there’s very generous tax breaks, whereby they’re saving the highest rates of income tax and basically being taxed at 15 per cent on the super that’s going into their super funds,” he said.
“Now I can understand why that happens from the perspective of encouraging people to use super as a way of saving for their retirement, but the problem is that the cost of that to [government] revenue is just becoming increasingly unwieldy.”
Speaking to SMSF Adviser, SMSF Owners’ Alliance executive director Duncan Fairweather said it shouldn’t be surprising that those who are on higher incomes benefit from superannuation tax concessions.
“What’s often overlooked in this debate is that the people on higher incomes paying many more dollars in income tax than those on lower incomes are.
“So while they’re getting a higher dollar benefit from the tax incentives or the tax concessions, they are paying much more in the first place in terms of income tax.”
Mr Fairweather said there are valid economic and social reasons to afford tax concessions to superannuation members, and called for an equitable debate around tax reform.
“Superannuation is a long-term investment that runs over the whole of your working life and the whole of your life in retirement, there needs to be consistency and stability and certainty of policy,” he said.
“We’re certainly not opposed to any change but it must be carefully thought through and implemented over time in a way that doesn’t disadvantage people who have saved under the existing rules.
“We’re not digging in our heels and saying nothing should be changed with superannuation system, but what we do say is if there is to be change particularly around taxation, then it needs to be carefully thought through and it needs to certainly requires a lot of consultation with stakeholders.”
This debate is getting tiresome. Less than 50% of the population pays net tax (less tax plus direct social security). If superannuation is a great ‘tax concession’ so is the aged pension but by another mechanism.
When the 2% income tax ‘on the wealthy’ (above$180k) is levied it, by the treasury figures I could google, pays about one quarter of the annual INCREASE in health and welfare ONLY payments. It would therefore need to be 8% to cover just one years increase!!
There are not enough ‘evil and undeserving wealthy’ to pay enough tax for rest of the country to sponge off.
Real reform, where EVERYBODY PAYS, not ‘someone other than me’ needs to occur.
Everyone is acting like a council road worker, standing in a circle holding a shovel and suggesting someone else get in the hole and start digging, just not themselves.
Let’s discuss true equity, for wealthy and poor and PLEASE start using som basic maths and demographics.
The Australian Superannuation System is one of the best in the world. The fact that we have an option to control our retirement savings(SMSF’s)ourselves has kept retail and industry funds on their toes and kept costs transparent and low. Let’s not muck around with the system! It is working well. Encouraging savings and personal involvement means that we have significant savings which is invested in our stock exchange, property of all types and various other investments. We lead the world with our Retirement Savings System. Do not let the politicians mess it up. Do not let the big end of town fund managers or the union led industry funds lobby for change for their own self-interest.
It is obvious that there seem to be many problems with super out there so why not identify and list of these problems so they can be dealt with on a global basis rather than ad hoc as at present. Get back to basics and then build a system required to achieve the stated objectives as consensus determined. There are great benefits for the whole country if the super system is structured properly and investments handled thoughtfully. SMSF’s are only a part of the system, and if tax concessions are given then perhaps the government could say that some % of the funds should be invested into necessary infrastructure projects for the future benefit of the nation so as to retain the tax advantages a bit like the past 30/20 ideas. Just a thought for comment.
How asymmetric.
So if tax advantages have to be curtailed, we need this must be thought through. But when the Howard Government in its dying days decided to remove RBLs and made post 60 benefits tax-exempt (HUGE CHANGES), the industry meeky submitted to them, because they were to its advantage!
Fairweather did not then demand that they must be carefully thought through from the affected taxpayer’s perspective.
Increasing SG is a change. Is it tinkering, destabilising and knee-jerk?
Self Interest!
Why not leave the contribution caps in place and seek to level the playing field by imposing a flat 10% rate of tax on earnings on pension phase. Still plenty of incentive to use the superannuation system for retirement planning and in relative terms, user still pays
What about taxing contributions and earning to constitutionally protected funds.
Currently salary sacrificed amounts over the age based limits are being contributed as salary sacrifice and no tax or super surcharge is being levied.
What is so equitable about that?
Equity for lower/medium income earners is key to incentivising more people to save and potentially becoming self-funded retirees (and saving the state money). If additional contributions above SG were to be included in assessable income and generate a (say) 15% tax rebate, both high income & low income earners would have the same incentive to save (and the same cost to the ATO). There must be other ideas out there to make the system better…?
Couple of points to consider in the national interest. Super should last only for the employee and spouse’s life-time not for future generations or estate planning schemes. The higher tax payers do not need generous super tax incentives to stay off the government payroll. Tax concessions on Super benefits should cease above a reasonable benefit limit for average living standards and full tax and medicare should then be charged on the excess. Super has become an industry with many vested interests who would oppose these changes for their own interest. Superannuation is not a get rich scheme for all but a concessionally taxed government incentive for a lifetime investment to secure a comfortable retirement after contributing to the building of the nation and reaping some benefits of that contribution. There are other ways to get rich outside super which the wealthy can find. Use the tax concessions for those who need it most and let each user of the nation’s resources pay accordingly.