ASFA finds flaws in Govt’s super tax assumptions
The Association of Superannuation Funds of Australia (ASFA) has used its pre-Budget submission to question the underlying Treasury assumptions behind the Government's proposals to alter the superannuation tax settings.
The submission, released late yesterday, claims there are "two serious conceptual shortcomings in the Treasury analysis" — with the estimate on the cost of tax concessions being based on investment earnings outside of superannuation, and with an incorrect assumption being made about how long people remain upper-income earners.
"The tax concession estimate is calculated on the basis that investment earnings outside
of superannuation would be taxed like interest from a bank account," the submission said. "The reality is that investment earnings outside of superannuation attract various concessions, including a 50 per cent discount on capital gains on assets held for more than 12 months. As a result
the Treasury figures overestimate the tax concession that flows from the concessional
treatment of investment earnings within a superannuation fund."
It then went on to claim that the more serious conceptual problem is that the Treasury analysis assumed that it was the same 1 or 5 per cent that stayed at the top of income distribution for a 37-year period from age 30 to 67.
"This is unrealistic and misleading," the submission said.
The submission said that ASFA supported the capping of concessional tax treatment of superannuation consistent with what might be reasonably needed for retirement income purposes, including what is needed to cope with future investment return uncertainty and with the financial consequences of longevity.
"Superannuation tax concessions should not extend to account balances which are being primarily used for estate planning," it said. "There is nothing wrong in itself with having a high superannuation account balance or other form of wealth; the relevant issue is whether such an account balance or wealth should attract a continuing tax concession."
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