Auditor’s open letter to Treasurer raises alternative to super tax

In her letter, Ms Randeria asks the Treasurer to look at increasing the GST rather than “tinkering with people’s super”.

“I appreciate the Federal Government has difficult decisions as it looks to make budget savings, but there are other options available which are less detrimental to the well-being of future generations,” she wrote.

“The Government should instead consider raising the GST, a simple measure which would positively impact the current fiscal deficit, and can be very effectively communicated to the Australian public

“Simply ‘taxing the rich’ is a tired political cliché and in this instance it’s also wrong.”

Ms Randeria said the super tax is a finite tax and the proposal means the government will be taxing assets, not income.

“This is a tax on capital value. Where will the Government go once they have pillaged and plundered superannuation? How can this be a sensible approach?” she said.

“GST is a perpetual alternative.”

“Currently superannuation funds support investments in major sectors like mining, infrastructure, healthcare and innovation. Dilution of the superannuation asset pool in order to pay tax on unearned profits will have adverse consequences on the financial markets which I believe has not been considered.”

“These changes will have an unprecedented negative impact on the entire economy.”

Ms Randeria said after nearly 30 years in the auditing sector, she has seen a raft of changes in the industry and said it is getting harder for people to get quality of advice when the goalposts keep changing.

“Being an auditor, I provide an objective insight into the industry and I know that people have saved really hard for their retirement and done the right thing. This proposal is undermining the entire retirement system,” she said.

“It seems both sides of the Government just come to superannuation to fix the fiscal problems, but $3.4 trillion in superannuation suggests that people are pretty good at managing their own money.”

She said after researching Treasury’s own documents she is adamant fiscal certainty would be easier to achieve by looking at GST instead of taxing superannuation.

“I’m not here to preach to Mr Chalmers but Treasury’s own documents suggest that the Australian tax system is overly reliant on corporate and personal income tax even though we are the 10th lowest taxing nation when comparing tax revenue to GDP.”

“Since inception there has been no indexation of the GST rate or reach. A simple GST reform could deliver a significant tax revenue with an ever-expanding base that would mean as the population and economy grows, an increased amount of tax is naturally collected.” she said.

“Currently, the State and Territory governments receive 45 per cent of their revenue through transfers from the Federal Government, including all GST revenue.

“And 12 per cent of that is GST. If the share of the GST contribution were to increase, it would automatically reduce the burden and reliance on other taxes, with the saving able to go toward correcting the fiscal deficit.”

“If I am the only one who is going to speak out against this then so be it. Would I rather have a government that makes stable, long-term policy decisions in the best interests of its people, or one that makes short-term decisions for the sake of election?”

OPEN LETTER 

Increase GST and Don’t Tinker with Super - An Open Letter to Federal Treasurer Jim Chalmers

Dear Dr Chalmers,

As a superannuation auditor with decades of experience, I write this letter to you with the interests of our economy at heart, and I urge you to reconsider your proposed changes to superannuation, for the good of all Australians.

The proposed changes strike a dagger into the very heart of the Australian superannuation system and undermines the notion that you can put long-term plans in place to benefit your retirement.

All those who have played by the current superannuation rules and been encouraged by various contribution measures to boost their super balance during their working lives are now finding that the goal posts have shifted.

I would argue that within the next four decades, having a retirement nest egg of more than $3 million will be considered ‘modest’ given the current rise in our cost of living, and more people will easily breach this hard cap.

The suggestion that the proposed changes will only impact around 80,000 people is wrong, as it will ultimately impact many more people in future years.

The introduction of a hard cap also undermines current contribution schemes, including the small business 15-year exemption, the small business retirement exemption and downsizer contributions, all of which encourage people nearing retirement to invest more into their superannuation and become self-sufficient.

Indexation isn’t the answer and I strongly believe these changes should not be implemented at all.

Of added concern is the plan to tax unrealised capital gains, which, if implemented goes against the very principles of investment and the current tax legislation on capital gains. It also impacts the most basic taxation principle of all – Fairness.

Currently, there is not a single investment product or structure in Australia where unrealised gains are taxed - including family trusts or corporate entities – so should Australians be concerned that this measure could also be implemented on unrealised gains outside of superannuation?

I believe this change will result in the sale of assets and the withdrawal of funds from superannuation accounts, as people are forced to pay tax on profits they have not yet seen – and may not ever.

I appreciate the Federal Government has difficult decisions to make as it looks to make budget savings, but there are other options available which are less detrimental to the well-being of future generations.

The Government should instead consider raising the GST, a simple measure which would positively impact the current fiscal deficit, and can be very effectively communicated to the Australian public

Simply ‘taxing the rich’ is a tired political cliché and in this instance it’s also wrong.

Division 293 already taxes people with incomes over $250,000 an additional 15% on superannuation contributions, with a further minimum 15% tax paid to the Government when these people die, and the death benefits are paid to their estate or non-dependents.

If your proposed measures are implemented, I have no doubt you will see a paradigm shift, where the Government will end up collecting less in taxes, forcing more people to rely on the Aged Pension in their later years.

A more prudent measure would be to minimise Australia’s future liability towards an aging population, rather than a goal of balancing the present-day fiscal deficit.

Dr Chalmers, I am sure you would agree that it’s in the long-term interests of Australians to contribute as much as they can into their superannuation. Your current proposal doesn’t encourage this and is unfortunately a disincentive to save.

The Australian superannuation system needs stability, and a moratorium on change, so that people can make long-term plans for a self-sufficient retirement.

Dr Chalmers, we have one of the most admired superannuation system in the world, and I strongly urge that it be kept that way.

Let people take care of their money, and their money take care of them.

Sincerely,

Naz Randeria.

Naz Randeria is the Managing Director of Reliance Auditing Services.