The federal government’s plan to introduce a 30 per cent concessional tax rate on earnings for superannuation balances over $3 million penalises people who have done nothing wrong and adds to uncertainty about what rules will apply when people retire, according to Chartered Accountants Australia and New Zealand (CAANZ).
CAANZ superannuation and financial services leader Tony Negline said while the accounting body did not dispute the need to bring more equity to the superannuation system, it was concerned about “the fairness of a large attack on a relatively small number of people who followed the rules”.
“The target of these changes is a relatively small number of people who played by the rules, which the government at the time set and kept for about 20 years between the late 1980s and 2006 against the advice of the industry,” Negline said.
He noted there had already been a number of tax changes, including the imposition of the current concessional rate of 15 per cent prior to 2007, the introduction of contribution caps from 2007 onwards, the addition of the $1.6 million limit on how much after-tax money could be deposit into superannuation in 2016 and a 30 per cent tax levied on those who earned more than $250,000 when investing in super.
“Investing in superannuation in this country is like trying to shoot a moving target flying in circles over shifting goalposts,” he said.
“The lead time is good as the changes will come into force after the next federal election, but it is still a major impact proposed on a small number of people who haven’t done anything wrong – they played by the rules and now the rules have changed.”
CAANZ also questioned how the tax would work for people with large balances spread over a number of superannuation accounts, if unfunded super entitlements would be included, the impact on divorce settlements and how capital gains in super, currently taxed at 10 per cent, would be taxed under the new policy.
“How can we ask people to invest in super now when you won’t know what rules will apply by the time people will need to access their money?” Negline said.
The Financial Services Council (FSC) also raised questions about the operation of the new tax rate and called on the government to rule out any other negative changes.
FSC chief executive Blake Briggs said: “Australians have some certainty on the government’s plan to increase taxes on superannuation savings after today’s announcement, including that there will be an initial transitional period before the new rules come into effect.
“The FSC urges the government to commit to using the revenue raised from the $3 million cap to improve equity in the superannuation system, particularly paying superannuation contributions on the government paid parental leave scheme.
“The government should go further and rule out more punitive changes to superannuation taxes so consumers can be confident using the superannuation system to save for their retirement.”
The council noted issues that still needed to be addressed include how investment earnings will be calculated, the impact on fund members if the $3 million threshold is not indexed, the interaction of the new tax and threshold with the transfer balance cap, and the impact on consumers in accumulation phase who are unable to adjust their super balances.
