The government should not be “tempted to fiddle” with superannuation in the federal Budget, with spending on super tax concessions proving a more effective use of government funds than paying an age pension.
In its pre-Budget submission, The SMSF Owners’ Alliance (SMSFOA) disputes the Financial System Inquiry’s (FSI's) claims regarding favourable tax concessions for high-income earners.
“The FSI suggested that the existing system of tax concessions favours high-income earners who would in any event be ‘likely to have saved sufficiently for their retirement, even in the absence of compulsory superannuation or tax concessions,’” SMSFOA stated.
“However, there is no evidence presented to support the FSI’s observation and we dispute it.”
Modelling by the SMSFOA shows that “spending” on superannuation tax concessions is more effective from a Budget perspective than distributing an age pension, the submission stated.
“The former encourages taxpayers to forego consumption during their working life in order to provide for their retirement,” SMSFOA stated.
“Most of the funds in super are an individual’s contributions. The tax concession is only approximately 10 per cent whereas the government pays 100 per cent of an age pension. An efficient super system makes economic sense.”
The SMSFOA also urged the government to reduce spending as opposed to raising taxes.
“We point out that the current government, like the previous government, does not have a revenue problem. Income and other tax revenue is still running at a record level. The problem is that spending is also still running at a high level,” the submission stated.
“While spending has levelled out in 2014/2015, a significant gap remains between what the government is collecting and what it is spending.
“All parties in the parliament, and particularly the balance of power senators, must recognise this fundamental reality.”
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