New super tax proposal gathers momentum
The Financial Services Council has joined calls for a super tax rebate to be introduced, as a former Association of Financial Advisers president makes headway with government.
In December last year, principal at Paramount Wealth Management, Wayne Leggett, said that instead of concessional contributions being tax-deductible, they should be subject to a tax rebate.
This week, the FSC said superannuation contributions should be taxed at an individual’s marginal tax rate with a 20 per cent rebate.
The FSC released modelling by PwC on Wednesday showing that a 20 per cent rebate on the marginal tax rates for super contributions would be budget-neutral.
However, the budget-neutral status of the proposal is dependent upon the superannuation guarantee following current legislation and rising to 12 per cent by 1 July 2021.
If the superannuation guarantee were instead frozen at its current rate of 9.5 per cent, there would be a decrease in tax receipts of less than $1 billion to $4 billion, according to the PwC modelling.
The change would see those on the highest marginal tax rate (45 per cent) paying 25 per cent on their super contributions, whereas those earning less than $37,000 a year would pay no tax.
Currently, all super contributions (up to the concessional contributions cap) are taxed at 15 per cent, with the exception of individuals who earn over $300,000 and who are taxed at 30 per cent.
Speaking to SMSF Adviser, Mr Leggett said he recently met with Western Australia’s federal member for Swan, Steve Irons, to discuss the proposal.
Mr Leggett said Mr Irons, who is in “close contact” with Assistant Treasurer Kelly O’Dwyer, will be discussing the idea with government.