In its submission to the federal government’s tax white paper, the SMSF Association has expressed its preference for the tax rules applying to superannuation to remain unchanged.
Despite its predilection for maintaining the status quo of the current superannuation taxation regime, the professional body also revealed it would consider the introduction of a system where the highest levels of retirement benefits were taxed in conjunction with lower personal tax rates for individuals qualifying for the new tax liabilities.
“We believe this proposal allows people to build adequate superannuation balances efficiently and is preferable to a more complex tax on earnings or high account balances, both of which are costly and inefficient,” SMSF Association chief executive Andrea Slattery said.
At the same time, the association stipulated it was opposed to any proposals that would result in an increase on super contributions and earnings, labelling them as being too complex to implement and detrimental to the objective of achieving an adequate level of retirement savings due to the loss of incentives for individuals to allocate more of their money to superannuation.
“By contrast, our preferred option is relatively simple to implement and would claw back tax preferences that are excessive to achieve the key objective of superannuation – giving people the opportunity to save for a self-sufficient, dignified and secure retirement,” Slattery said.
“We believe that this strikes the right balance between providing people with appropriate incentives to sacrifice their current income for long-term retirement savings and ensuring that superannuation is fair and sustainable.
“A light tax on benefits that exceed a generous tax-free threshold is the simplest and most efficient way to improve the equity and sustainability of the superannuation system.
“This approach taxes outside the super system and allows people to make their own decisions about how they manage their benefits in retirement.”
The industry body also argued any changes to the taxation of retirement savings had to be carefully considered and must incorporate a sufficient transition period.
In particular, it stressed the importance for the government to recognise superannuation was not to be used as a fiscal lever.
“Superannuation was established to be Australia’s primary retirement savings vehicle, as well as a national pool of savings, and as such should not be considered a source of government revenue,” Slattery said.
