Rejected super tax reforms could be back on the table

Reforms to superannuation taxes seem to be firmly back on the negotiating table after Prime Minister Malcolm Turnbull’s mini-summit last week.

Business and community group participants were reportedly in near-unanimous agreement that tax concessions were in need of review in the reform process to ensure these were “fit for purpose” in Australia’s future tax landscape.

Refreshingly, it seems that ideas previously ruled out have been allowed back to the table, with seemingly, for now at least, nothing considered off limits.

Groups as diverse as the ACTU and the Business Council of Australia presented to the government an agreed view that super tax concessions were increasingly in danger of being misused for pure wealth creation, and not to help Australians fund their retirement, as was envisaged originally.

Plans revisited
Taxpayers Australia made its own submission to the government’s tax white paper Re:Think (download it here), which looked to the Taxpayers membership base for inspiration and ideas to pursue sensible tax reform, including superannuation tax concessions.

The results of our conversations with the membership seemed to provide wide support to address perceived equity issues, such as the ability of a small subset of taxpayers being able to earn considerable income tax-free while accessing government services and benefits. There was little support however for a progressive rate of taxation on concessional contributions as this would reduce super fund balances and act as a disincentive to making additional contributions.

Incentives to pursue gainful employment were also viewed as desirable, and lifetime caps on non-concessional contributions were seen as a positive approach to make sure super was not used just to protect wealth as opposed to funding adequate retirement savings.

Your thoughts?
Now that a fresh look at ideas that seemingly had the book shut on them seems to be in the offing, which reforms to the taxes on the superannuation sector still resonate? We spoke to a couple of our members for a response.

Mike Dunn is a relatively new member of Superannuation Australia and runs his own SMSF auditing service in Sydney. He concedes that superannuation tax concessions may be seen as generous, but adds that this is reasonable. “Any person with an SMSF, and we’re talking a member living off maybe an average of $500,000 balance, with no age-related concessions probably, to me it seems reasonable to leave the concessionary treatment as it is,” Mike says.

The idea of having incentives put in place, such as a 15% tax rate cut, to encourage over 65s to keep earning an income, he views as a great idea. “To keep them working, even part-time, and keep contributing even to a small degree, is a good idea,” he says.

Melbourne-based EPA Group provides services and support to many SMSF trustee clients, and has been a Superannuation Australia member for many years. Principal Egbert Pereira laments the lack of certainty that has plagued the SMSF and more general superannuation sector for years now.

“There is a great need for lot more certainty around any proposed changes,” he says. “For example, concessional contribution caps, or the excess contributions regime. Everyone craves clarity — there have been three significant changes in the last 18 months alone on the ATO’s treatment of certain contributions, and these sorts of reforms need clear transitional measures to allow trustees to handle these changes.”

Another contentious area Egbert sees as being in need of attention is the tax-free status of pensions, regardless of the assets supporting those pensions. “There should be some kind of threshold to that tax-free income,” he says. “This has been reported as being a $3 billion hole in revenue. And that hole needs to be plugged. There’s still a good argument for a tax-free threshold, but not to the existing extent.”

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