High-income earners are likely to be the biggest losers under the new superannuation laws, having effectively had new taxes levied upon them, a sector expert has said.
Insyt founder Darren Wynen is referring to two items of the new legislative regime, one of which dictates a tax on concessional contributions of 30 per cent, rather than 15 per cent, will be levied on individuals whose yearly earnings are greater than $300,000.
The other change Wynen has highlighted is the interest penalty levied on excess concessional contributions caps to compensate the Australian Taxation Office (ATO) for the time value of the overages.
“If you’re a high-income earner, you’re going to be faced with quite a few tax differentials to what you previously had both with the $300,000 limit and now with this new interest charge as well,” Wynen told selfmanagedsuper.
“Also, the interest charge is levied from the start of the year, so if you make a contribution at 30 June that puts you in breach of the cap, then the ATO will go back to 1 July of the previous year to measure the interest on a compounding basis.”
According to Wynen, high-income earners would only experience the downside of the changes as a large number of them would be part of the highest tax bracket, making the new excess contributions tax (ECT) regime based on an individual’s marginal tax rate irrelevant.
“I see it as the invention of a new tax. The government seems to suggest because you only get hit with a one-off penalty that’s okay because you’ve now got the ability to have that money in your SMSF ad infinitum with a lower tax charge,” he said.
“So if you’re a top income earner, you’re going to be worse off under this ECT even though it’s been sold [that] you’ll be better off.”
He said he believed the inequity was the result of the legislation being rushed through this year.
“One of the issues is that because it’s been rushed through there was not adequate time for consultation and consideration of some of these matters,” he said.
