The federal government should set a hard cap on superannuation balances at $10 million rather than introduce its proposed additional earnings tax for balances over $3 million, which will be complex to implement and operate, according to Chartered Accountants Australia and New Zealand (CAANZ).
CAANZ made the call for the $10 million cap as part of its submission in response to Treasury’s “Better Targeted Superannuation Concessions” consultation paper, in which it stated it did not support proposals to reduce the tax concessions on superannuation when the total super balance exceeded $3 million.
“We believe a simpler approach may be for the government to say that a superannuation fund member cannot have an account balance of more than $10 million unless that person is in receipt of structured settlement contributions, personal injury orders or total and permanent disablement benefits,” the submission stated.
“In effect, those who have account balances of more than $10 million would be required to withdraw that money from the superannuation system.
“They should be required to do this over a three-year period or longer if the ATO approves.
“Any benefits should be tax-free to the recipient and capital gains tax should not have to be paid by the superannuation fund when disposing of an asset in order to make this benefit payment.”
Speaking with selfmanagedsuper, CAANZ superannuation leader Tony Negline said: “Rather than create more complexity in superannuation, the government should set a number, and we think $10 million is reasonable as the maximum that can be held in superannuation.
“There will be some policy issues to sort out, but a set limit, with time to dispose of assets such as property, will be simpler than the complex system the government proposes, which will cause restructuring in the sector and add ongoing transaction costs and extra reporting.”
Negline said the proposed $3 million soft-cap measure would force some large fund balances out of superannuation, reducing the tax gains the government was seeking, and the proposal created mixed messages for super fund members.
“The government has put forward an objective for superannuation to save for retirement, but wants to address the presence of large balances with a new tax measure,” he said.
“In February this year, it stated it did not want to restrict or diminish anyone’s superannuation balance, but will do so cutting the current tax concessions.”
