...... but we seem to find new ways to undermine consumer confidence in our superannuation system," says David Anderson.
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Using Treasury’s tax expenditure figures to shape superannuation policy without taking into consideration the Age Pension savings is “short-sighted and defective”. This is the view of Mercer senior partner and author of the report, Tax and Superannuation: the shortcomings of the superannuation taxation expenditures, David Knox. “Last week’s announced superannuation changes are primarily at the margin. The tax expenditure debate will not go away if the tax expenditure figures are relied upon as the proof point for future reforms,” he said. Knox pointed out the potential revenue gain for government is much lower than the quoted value of the superannuation tax expenditure due to several shortcomings within the Treasury approach. “Firstly, it ignores future Age Pension costs which will inevitably increase if super benefits were reduced due to higher tax on contributions, earnings or benefits. Secondly, it ignores any redirection of contributions to other tax-effective investments that would occur if the super rules became less favourable,” he said. “The cost of super tax concessions to government is therefore only part of our retirement savings story. Concentrating only on one element is a flawed approach to setting long-term policy that will affect Australians and the Australian economy. “Continuous tinkering to super will drive Australians to choose alternative tax-effective investments for their voluntary super contributions and this is a not a good long-term outcome.” Super tax versus Age Pension savings. Mercer’s report reveals the cost of super tax concessions to the government increases by 187 per cent from an average wage earner to someone who earns double the average wage. However, the Age Pension savings for the government increase by 310 per cent between the two. It found that the net cost to government, accounting for future Age Pension savings, for an average wage earner is 63 per cent of the tax concessions and reduces to 45 per cent for an individual on double the average wage. Mercer’s managing director for the Pacific, David Anderson, warned that continuous speculation threatens sustainable policy outcomes. “Australia has the third-best retirement savings and income system in the world, according to the Melbourne Mercer Global Pension Index, but we seem to find new ways to undermine consumer confidence in our superannuation system. The recent speculation around tax concessions has understandably shaken confidence,” he said. “It is not true that super tax concessions are overly generous in this country. Of the top eight retirement savings and income systems in the world, Australia only ranks sixth for the generosity of tax concessions.” Associated response
In response to media reports, the Association of Superannuation Funds of Australia (ASFA) has released a statement suggesting that many more people will be affected by the proposed tax on retiree earnings over $100,000 per annum than the 16,000 claimed by the government.
According to ASFA, the confusion stems from the fact that many superannuation funds, including many self-managed superannuation funds, have double-digit returns in prospect this year, largely driven by increases in share prices both in Australia and overseas.
“Fund members should not confuse the amount of their investment earnings that are credited to their superannuation account with the amount of investment earnings that would be reported to the Australian Taxation Office (ATO) if the proposed measure is legislated,” said ASFA chief executive Pauline Vamos. Andrew Starke
9th April 2013
Source: Professional Planner www.professionalplanner.com.au
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