Accountants warn on income streams
The Federal Government has been warned against tinkering with the superannuation tax concessions in a way which would act to remove the incentive for people to save for a comfortable retirement.
Chartered Accountants Australia and New Zealand (CAANZ) has used its submission to the Tax White Paper Taskforce to argue that the Government and critics of the superannuation tax concessions should not lose sight of why the tax advantaged status was imposed in the first place.
"Super is considered a tax advantaged saving tool — an incentive to save. If the result is greater retirement savings, this should be seen as a positive. We caution against being critical of the very behaviour that tax concessions are designed to encourage," the submission said.
However, the submission also acknowledged that where wealthier Australians with higher superannuation account balances are concerned, there is no question that superannuation is often being used as a tax planning tool.
The submission said that, on this basis, CAANZ supported the concept of "capping access to superannuation tax concessions once a high enough balance has been achieved".
"However, we caution that there are many circumstances in which a ‘high enough' balance will vary significantly — number of dependants, nature of dependants (disabled children or invalid parents), owning home or renting, life expectancy etc," it said.
The submission said the amount would have to be set at a high enough level that people would not ultimately be disadvantaged or end up age pension recipients anyway.
The CAANZ submission also urged against making changes to the tax settings which would inhibit the taking of income streams.
"The tax free nature of superannuation funds paying income streams is often seen as being the overly generous," it said. "While CAANZ believes that this may need to be reviewed in terms of level of tax or access to this concession, we urge the Government to consider the intent behind the policy.
"Removing income tax (including capital gains) on earnings from assets that were being used to pay an income stream acts as a strong incentive for people to withdraw from their superannuation as a gradual income stream rather than as a lump sum. This was considered desirable to ensure people's superannuation lasted longer and reduced either the likelihood of them accessing age pension or the amount of age pension they were eligible for.
"CAANZ believes incentives need to remain for Australians to take an income stream rather than a lump sum and any changes to the tax free status of pension paying funds needs to ensure that incentives remain."
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