Surcharge net gets its catch

ASFA/superannuation-funds/superannuation-contributions/federal-government/chief-executive/

20 February 2003
| By Ben Abbott |

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.

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