Some of the revenue generated by the proposed Division 296 tax should be used to boost the balances of low-income earners, according to the superannuation industry peak body, which also rejected using a deeming rate when calculating earnings.
The Association of Superannuation Funds of Australia (ASFA) made the comments in a new research paper in which it called for $750 million of revenue generated by the Division 293 and Division 296 taxes to be set aside to increase the Low Income Superannuation Tax Offset (LISTO).
The LISTO is applied to those with lower incomes to ensure they are not disadvantaged by the taxation of superannuation contributions relative to personal income, with ASFA calling for the threshold to be lifted from $37,000 to $45,000 and boosting the maximum payment from $500 to $700.
It noted when both taxes are in operation they would raise around $3.5 billion a year and ASFA chief executive Mary Delahunty said the change would benefit an additional 1.2 million Australians, a majority of whom are women and many of whom are young workers and workers from a non-English speaking background.
“Division 296 and Division 293 aren’t just measures aimed removing tax concessions for those with high super balances – it’s an opportunity to make society fairer and provide low-income workers with a more dignified and secure retirement,” Delahunty said.
“By increasing support for low-income earners and ensuring fair tax contributions from those with substantial superannuation balances, we can foster a more balanced and equitable retirement system.”
Addressing the operation of the Division 296 tax, ASFA pushed back on the calls for earnings to be calculated using a deeming rate to address the issue of the taxation of unrealised capital gains, noting while this form of taxation was “an unorthodox approach”, it would minimise implementation and ongoing administration costs by making use of data already collected.
“There also has been a suggestion that a uniform deemed rate of investment return be applied. This would lead to those with low investment returns being overcharged the tax and those with relatively high investment returns being subject to a low rate of tax,” the research paper stated.
“The various suggested alternative methods would generally lead to significantly lower measured investment returns on average and would mean that revenue built into the forward estimates would not be collected.”
