The government should maintain its focus on long-term reforms to superannuation and ignore calls for super fund earnings to be taxed in the May Budget, according to the SMSF Owners' Alliance (SMSFOA).
The SMSFOA said the government should wait till the upcoming taxation white paper before making any decisions on changes to the superannuation system.
“Changes to the superannuation system have long-term implications for all working Australians and should be considered only when a consensus view on the objectives of the superannuation system has been achieved, as recommended by David Murray’s recent Financial System Inquiry,” said the SMSFOA.
The white paper, the SMSFOA said, should result in recommendations, based on careful economic analysis of an adequate and sustainable retirement savings system, to carry forward.
“Such a measured and transparent approach is necessary to give certainty to retirement incomes policy and give Australians the confidence to invest their savings throughout their working lives to ensure financial independence in retirement,” said the SMSFOA.
On the other hand taxing the earnings of super funds to reduce the Budget deficit, the SMSFOA said, is not the easy solution that some commentators claim it is.
The association said the justification that superannuation tax incentives are a huge cost to the Budget is based on heavily qualified treasury estimates.
“Their second premise that the top 20 per cent of income earners get around 55 per cent of super tax concessions conveniently overlooks that the same top 20 per cent of income earners pay an even larger share, 65 per cent, of income tax,” said the SMSFOA.
“The earnings tax idea was tried by the previous government in 2013 and was not implemented by the current government as it was unworkable in practice and wouldn’t have raised much revenue.”
The SMSFOA said implementing the tax on superannuation income will hurt those who have “done the right thing and saved enough to support themselves in retirement without recourse to a taxpayer funded age pension”.
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