Super tax law reform needed urgently

By Mike Taylor

ONE of the major accounting bodies has stepped up its lobbying on superannuation, claiming self-employed people are significantly disadvantaged when it comes to retirement savings.

The Institute of Chartered Accountants in Australia (ICAA) has claimed that the Income Tax Assessment Act discriminates against the self-employed and hinders their ability to save for retirement.

ICAA superannuation spokeswoman Susan Orchard said this discrimination occurs because the Income Tax Assessment Act does not define the self-employed, resulting in different savings and tax outcomes for those Australians who are self-employed.

She said this meant there were three main areas in superannuation in which the self-employed were disadvantaged — superannuation co-contributions, taxation of invalidity payments, and eligible service periods.

“This makes self-employed people potentially thousands of dollars worse off,” Orchard said.

The ICAA has used a submission to the Treasury to call on the Government to review the taxation system to make it fairer and more equitable.

The submission also calls on the Government to rectify the inequity between married couples and singles in retirement.

Orchard said that reform of taxation as it applies to superannuation is overdue in circumstances where the taxation of superannuation both within a fund and upon exit is complex and difficult to understand.

“Complex taxation arrangements make it difficult to make economic decisions about superannuation without assistance,” she said.

“Often individuals fail to see the advantage of taking an income stream versus superannuation lump sum upon retirement, which can have adverse financial outcomes, particularly for those who were middle income earners when employed.”