The SMSF Association has questioned some of the tax observations included in the Financial System Inquiry (FSI) based on its own factual observations and practicality concerns.
Presenting at the recent 2015 SMSF Association National Conference in Melbourne, technical and policy senior manager Jordan George dispelled the scenario the FSI panel relied on as a basis to suggest alignment was needed between the taxation rate that applied in accumulation phase and the tax-free pension phase treatment.
“This was very much put forward by the FSI because it believed changing from tax in accumulation [phase] to no tax in pension [phase] distorts investment decisions and makes people look for tax arbitrage opportunities,” George said.
“Our view very much is that we haven’t seen any evidence of that yet, but it’s something to be considered in the tax white paper.”
In regard to the observation the system needed to be equitable whereby one band of taxpayer was not overly advantaged by the tax concessions for superannuation, he said the SMSF Association accepted that view although careful consideration needed to be given to the super system as a whole.
“These tax concessions are inherent in the design of the superannuation [system] and they are giving people compensation for locking their money away for periods of 20, 30 or 40 years,” he said.
“You can’t really expect people to save and put money away without some incentive to do so.”
He pointed out the SMSF Association disagreed with reducing the non-concessional contributions cap to achieve superannuation tax equity.
“We believe that’s an important mechanism that allows people to [make] catch-up contributions later in their life cycle as they are transitioning to retirement,” he said.
He also said the industry body did not support the observation that an additional earnings tax needed to be levied on superannuation account balances above a certain level.
“We think that is an overly complicated way of achieving [tax] equity in the system,” he said.
