The Financial Advice Association Australia (FAAA) has given its support to the principle behind the government’s proposed new tax on super balances over $3 million, but has called for amendments to the threshold and the calculation method of the charge.
In its submission to Treasury’s “Better Targeted Super Concessions” consultation paper, the industry body highlighted four issues that need addressing in order for the system to remain fair.
Firstly, the FAAA suggested that rather than introduce a new set of rules for calculating an individual’s earnings and tax obligations, the calculation of the new tax should be performed within existing superannuation and taxation laws.
Secondly, it suggested the soft cap should be increased beyond $3 million and indexed in line with rises in the consumer price index over time to ensure equity and long-term confidence in the superannuation system.
The submission also noted the proposed additional 15 per cent tax rate may have a more significant impact than expected, highlighting factors such as the taxing of unrealised capital gains, the absence of the ability to use the capital gains tax discount and the lack of access to franking credits.
“The FAAA recommends that the increased tax rate be reduced to a level materially below 30 per cent to avoid creating a significant disincentive for Australians to invest in their superannuation in their earlier years in the workforce,” it said.
Finally, the newly formed professional organisation advised the move may encourage Australians to save money in an environment taxed at higher levels again due to the calculation method whereby unrealised capital gains are charged.
“Priority should be given to identifying solutions to these issues in order to improve the short and long-term certainty for consumers regarding proposed changes to the superannuation tax concessions,” FAAA chief executive Sarah Abood said.