Legislation, SMSF, Superannuation, Tax

New super tax attracts more criticism

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More criticism has been levelled at the proposed $3 million soft cap on the basis it is inequitable and lacks transparency.

The proposed tax on individuals with a total super balance above $3 million has received further criticism on the grounds it will produce inequitable outcomes and the formulation of the threshold itself lacks transparency.

Reliance Auditing Services director Naz Randeria indicated the measure will end up treating individuals who essentially hold identical assets in an inconsistent manner.

“Property values can differ widely across the country and is out of the control of superannuants,” Randeria noted.

“Why should someone be punished if property, or any other asset in their superannuation fund, increases in value faster than the next person?”

With regard to the total super balance limit of $3 million, she accused the government of applying an arbitrary figure without explaining how it had been selected and pointed out the flawed implied message.

“It’s also being touted as an out-of-reach figure for ordinary Australians, with the government continually claiming that only around 80,000 people will be impacted,” she said.

“Putting aside how insulting that argument is to ordinary Australians – essentially telling people they will never become financially comfortable even after years of working and saving – it’s also wrong.”

Like many other SMSF stakeholders, she highlighted the possible adverse consequences resulting from the fact no indexation provision has been included as part of the measure.

“The government has failed to consider inflation, wage rises, the increased cost of living or even regional disparities,” she noted.

“Three million dollars today will be worth much less in coming decades, which means the number of people who breach the threshold will continue to increase, perhaps incrementally at first, but likely much quicker in years to come.”

Further, she said the proposed policy is unfair due to its retrospective application as this aspect punishes people who in the past had been encouraged to contribute more money into their super funds.

In addition, she suggested the measure will end up being counterproductive as it will significantly change attitudes to allocating money to the retirement savings system.

“I have no doubt the proposal will see people shift the way they approach superannuation, pulling money out of accounts to remain under the $3 million threshold, and encouraging more people to instead rely on the aged pension,” she said.

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