Changes to the way superannuation is taxed in Australia need not be perceived negatively despite the fact large tax incentives to certain individuals may be removed, according to the partner of an accounting firm.
Speaking at the recent 2015 Institute of Public Accountants National Congress on the Gold Coast, Grant Thornton tax partner Paul Bannister said: “For our clients who were really super interested in using super before [then treasurer Peter] Costello reformed it back in 2006/07, it worked beautifully despite the fact they had a tax on the way in, tax along the way and tax on withdrawals.
“So it can still work, it’s just a question of whether we can afford it.”
Bannister claimed the tax benefits currently associated with people’s retirement savings were too generous and unsustainable.
“It’s a tax haven. Who can get a negative 42 per cent tax rate anywhere in the world?” he said.
“It doesn’t get any better than that anywhere, but it’s something that’s costing us a huge amount of money and needs some reform.”
He did point out some of the suggested changes to the system were potentially going to take the superannuation tax system back to the framework that had existed previously.
“The interesting thing though is how they are going to administer [the reforms]. The [framework] that seems to be getting a lot of publicity and support from the lobbyists is having some cap, say $2.5 million per individual lifetime cap,” he said.
“So in a way it’s the reintroduction of the old reasonable benefit limits.
“Who knows if that’s going to ultimately hold sway and how much that will be, but there is a fair bit of work on the maximum usage of the system.”