The SMSF Owners’ Alliance (SMSFOA) has called on the federal government to reform the tax system being applied to superannuation by abolishing all taxes charged on fund earnings and changing the way contributions are taxed.
“Our strong understanding of ‘fairness’ is that all Australians should be given equal opportunity and treated equally, with the progressive income tax structure and social security system being the drivers of redistribution to assist those who are truly vulnerable and unable to survive without such assistance,” SMSFOA chair Bruce Foy said.
Specifically, the SMSFOA has written to the Treasurer suggesting a flat-rate tax rebate be applied to all retirement savings contributions, a measure included in the recommendations of the Henry tax review in 2009.
Further, to make the system fairer for low to middle-income earners, the lobby group said it would like the rebate to be adjusted in line with increases in the income tax threshold.
The original level of rebate called for is 15 per cent.
According to the SMSFOA, the implementation of those measures would bring Australia closer to the benchmark for an efficient savings system, called the Standard, where contributions and earnings were tax-free while tax was charged on pensions.
“Our modelling shows that if the rebate is set at 15 per cent and all earnings are exempt, then tax receipts by government would be slightly higher than under the Standard,” it said.
The industry group said it believed the adoption of the system would alleviate the need to increase the contributions caps.
It also said taxation and administrative costs would fall, improving the compounding ability of people’s superannuation assets and that complicated grandfathering provisions to avoid retrospective disadvantages would be unnecessary.
