Major accounting body proposes shift of super tax ‘burden’
In a submission to the government’s tax discussion paper, a major accounting body has urged the government to consider changing the points of taxation within superannuation.
CPA Australia proposed shifting some of the tax “burden” from the contributions phase to the benefits phase.
The accounting body argued that the most equitable retirement savings system would tax income in the hands of the individual when it is actually received.
“That is, contributions would be tax exempt, fund earnings would be tax exempt or concessionally taxed, and benefits would be taxed,” said the submission.
CPA proposed that Australia should shift its superannuation system to an EET (exempt, exempt, taxed) model.
“The EET model is the most common taxation model used in the majority of OECD countries – Australia is unique in taxing retirement savings at all three points,” the submission stated.
Constant changes to the rules and revenue grabs by governments, such as the repeal of the low-income superannuation contribution and delaying the increase of the superannuation guarantee to 12 per cent, “undermine public confidence in the system which may have negative impacts on Australia’s long term savings”, CPA said.
“It is therefore more important than ever that the policy levers, including taxation, are set appropriately to help ensure superannuation provides adequate retirement savings,” said the submission.
The submission argued that the taxation of superannuation should not be considered in isolation; rather, "there must be a long-term vision and objectives for our retirement savings system", it said.
It argued that developing an effective retirement savings policy is more than just about developing objectives for the superannuation system and enshrining them in legislation.
“It must also encompass the age pension, non-superannuation investments and the family home, employment and aged care,” it said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.