Flat tax rate for pension phase likely, says IOOF
Given the administrative challenges posed by some proposals put forward in the Tax White Paper process, the government is more likely to implement a flat tax rate across all superannuation pensions, according to IOOF.
Speaking to SMSF Adviser, IOOF national manager of technical services Kate Anderson said that if the government does decide to proceed with changes to superannuation, it may look at introducing a flat tax rate of around 10 per cent in the pension phase.
Ms Anderson said that from an administrative point of view, this would be easier to implement compared with some of the other proposals, such as capping the funds forming a retirement income stream at $2.5 million, as proposed by the Association of Superannuation Funds of Australia.
“It’s too hard to administer – if [the government] says, okay if your balance is over $2 million in pension phase, then you’ll be taxed at five or 10 per cent, well when is that $2 million calculated? Is it at the beginning of the financial year or halfway through?” said Ms Anderson.
“What happens if you’ve got fluctuations in property or listed securities?”
Ms Anderson said that while the tax discussion paper has made suggestions that one of the focuses of the white paper will be superannuation and retirement income streams, it is unlikely there will be any changes until after the next election.
“The government has come through and they won’t make any significant changes to super,” said Ms Anderson.
Any changes need to be made as part of a broader picture, she said, whether they are changes to super and retirement income streams or changes to social security.
“Everyone sort of needs to sit down together and make sure that it’s all in line, instead of changing super and not changing social security, and not changing tax – it all needs to done simultaneously,” she 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 has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.