Surcharge net gets its catch
TheAssociation of Superannuation Funds of Australia (ASFA)has claimed the superannuation surcharge is now affecting 10 per cent of the workforce each year.
Equating to 900,000 individuals, ASFA says this figure will continue to grow as more individuals accumulate superannuation savings over the course of their careers.
“It's fair to say the super surcharge is now creeping into what is generally regarded as the middle income area,” ASFA chief executive Philippa Smith says.
When introduced in 1996, the surcharge was expected to affect 350,000 individuals and collect around $300 million in tax, though an estimated $800 million will be raised in 2002/03.
According to Smith, there is a myth that the surcharge, which is charged at its highest rate for those earning over $90,000 a year, only affects very high income earners.
She says the problem is the definition of income for surcharge eligibility, which includes superannuation contributions, fringe benefits and long service leave entitlements.
“An individual on a mid-range salary package of around $60,000 per annum can become subject to the surcharge if they have some reportable fringe benefits or are retrenched with accrued long service leave,” Smith says.
Those with fluctuating incomes are also unfairly caught by the tax, according to Smith, including women or others with broken work patterns trying to increase their savings.
“It's also plain unjust for those facing redundancy who find their long service leave entitlements are counted, pushing them into the surcharge arrangements,” she says.
Earlier this month, the High Court ruled that state judges would have an exemption from the surcharge, a decision highlighting the surcharge’s anomalies and inequities according to ASFA.
“The absurdities of this tax continue to grow. The only fair and equitable solution is to remove all contributions taxes on super and deal with equity concerns when benefits are paid,” Smith says.
The Federal Government has proposed a phased cut in the surcharge rate in the recent Budget, a move so far blocked by Labor in the Senate.
Recommended for you
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
Insignia Financial has experienced total quarterly net outflows of $1.8 billion as a result of client rebalancing, while its multi-asset flows halved from the prior quarter.
Prime Financial is looking to shed its “sleeping giant” reputation with larger M&A transactions going forward, having agreed to acquire research firm Lincoln Indicators.
An affiliate of Pinnacle Investment Management has expanded its reach with a London office as the fund manager seeks to grow its overseas distribution into the UK and Europe.