New laws will be needed under current super proposal: FAAA
The current super tax proposal will introduce a new set of laws to the system with a new complex formula for calculating an individual’s earnings that will be subject to the additional tax rate and tax liability, says the FAAA.
In its submission to Treasury in regard to the proposed changes, the FAAA said there were four key areas with which it had concerns including its complexity stating that consideration should be given to aligning the new measure to existing superannuation and taxation laws as much as possible.
Secondly, the FAAA said that to ensure the equity of the system is maintained over time, it believes the proposed superannuation earnings concessional tax threshold should increase to keep pace with wage increases.
It recommends the threshold be higher than $3 million and indexed in line with increases in the CPI to provide greater certainty for consumers over the long-term.
Additionally, the FAAA is concerned that, in reality, the impact of the proposed increase in the tax rate will be substantially more due to a number of factors including the taxing of unrealised gains, the lack of access to the one-third CGT discount that applies to super funds and the lack of access to the benefit of franking credits that would otherwise be available to super funds.
It recommended that the increased tax rate be reduced to a level materially below 30 per cent, to avoid creating a significant disincentive for Australians to invest in their superannuation in their earlier years in the workforce.
Finally, the FAAA is concerned that the proposed formula – which includes unrealised gains in the year’s earnings – would result in Australians being required to keep their money invested in what might be a higher tax environment than is optimal, and losing the many benefits of deferred consumption that the superannuation system encourages.
“We are open to the principle that those with very substantial superannuation balances would not have unlimited access to the tax concessions on superannuation earnings,” said Sarah Abood, CEO of the FAAA.
“However, we have reservations about the impact of some of the proposals, and any unintended consequences.
“Priority should be given to identifying solutions to these issues, in order to improve the short and long-term certainty for consumers regarding proposed changes to the superannuation tax concessions.”
