The federal budget must not be silent on key areas of superannuation reform, including the rules related to non-arm’s-length income (NALI), according to Chartered Accountants Australia and New Zealand (CAANZ).
CAANZ superannuation leader Tony Negline said the accounting body was aware of the realities of the budget and the government’s focus on funding the plans it took to the May election, but changes required to NALI would also have a widespread benefit.
“Reform is vital at this time and central to this is the NALI rules, which may have a dramatic impact on the viability of all super funds,” Negline said.
“The current NALI rules need urgent reform so that relatively benign arrangements do not see superannuation funds’ income and realised capital gains taxed at a 45 per cent penalty tax rate.
“This very high tax rate could apply to compulsory superannuation guarantee employer contributions, which means these contributions will taxed at 45 per cent rather than 15 per cent.
“We have been asking the government to clarify how it plans to ensure the NALI rules remain an anti-avoidance measure and not a penalty that could apply to everyone and we hope the government makes an announcement in the budget.”
The government has given no indication as to its view on the changes to the NALI rules since coming to office, but has been made aware of the issues.
Negline also called for more simplification in the tax and superannuation system as it was “unreasonably complex and costly to administer”.
“There are too many rules across too many pieces of legislation and regulation. Simplification will reduce costs and enable better outcomes to be delivered more efficiently,” he said.
“Even things like clarifying and aligning the definitions of employee and contractor will make a difference. It remains inconsistent and uncertain from an income tax, superannuation and workers’ compensation perspective. Alignment would help greatly with all commonwealth industrial relations, tax and super laws.”
The SMSF Association has also called on the government to deliver on the tax and superannuation reforms it put forward during the election campaign, but the opposition has urged the government not to engage in large-scale changes that some industry stakeholders have been suggesting.