The federal government’s proposal for an additional tax on the earnings of superannuation balances over $3 million is inconsistent with its aims of trying to impose an equity measure on super, according to an SMSF specialist.
SMSF Alliance practice principal David Busoli said the move to tax the earnings of superannuation balances above $3 million at 30 per cent was flawed in its application and calculation.
“This ‘equity’ measure seeks to impose a non-indexed cap,” Busoli said.
“It is disingenuous of the government to state that the measure will only effect 80,000 members when they well know that bracket creep will cause that number to grow by a multiple in under 10 years.
“Indexation is not negotiable. It is mandatory. Anything less makes a mockery of the concept of equity.”
He noted the calculation of the proposed additional tax was also not as simple as presented by the government, but could be brought back towards its original intent by a simple software fix.
“[The proposed formula] does not impose an additional 15 per cent tax on the income of high-balance members. It is not based on taxable income at all. It is a new type of wealth tax that includes unrealised gains,” he said.
“This method has been proposed because it is easy to calculate and does not require any changes to existing systems. Convenience does not equal fairness.
“It would not be particularly onerous for an additional field to be incorporated into fund financials which specifies the pre-tax income attributable to each superannuation interest.
“It’s a software issue and a rather easy one at that. The ATO could then impose an additional 15 per cent tax on this amount. The result would be what the government announced – not what their proposed methodology would achieve.
“With a focus on the handful of members with balances in excess of $100 million, the government initially had the opposition on the back foot but the pendulum is swinging back.
“The government needs to remember how [former coalition leader] John Hewson lost the unlosable election in 1993 when he could not explain how his proposed GST (goods and services tax) on food would affect the price of a birthday cake.”
He has previously noted the government should consider using a deeming rate to calculate the proposed additional charge on superannuation balances rather than it being based on the change in total super balances, which would lead to a better outcome for fund members.
