The SMSF Professionals’ Association of Australia (SPAA) has labeled the current method to measure superannuation tax concessions as “theoretically correct” but still “fatally flawed” and claims it ignores the retirement income purpose of superannuation.
SPAA chief executive Andrea Slattery said measuring superannuation tax concessions as tax expenditure using a comprehensive income benchmark was misleading. It created bias against concessions since any changes in the income being taxed at a taxpayer’s marginal tax rate is regarded as a cost to government revenue.
This in turn ignores the purpose for which the superannuation system was created, Slattery said, which was to provide greater self-generated retirement income while decreasing reliance on the Government for retirement income support.
Slattery conceded that the current method was theoretically correct while it used a comprehensive income benchmark, but that it failed to include future government savings from reduced spending on the age pension or tax revenue gained from earnings of superannuation investments or benefits taxed on withdrawal.
Furthermore, Slattery said short-term budget forecast figures that rely on four-year revenue estimates to make changes to the concessions were the wrong way to assess superannuation tax concessions, as was the short-term focus found in the Tax Expenditure Statements that centred on single income years.
“These short-term costings create myopic views of the superannuation tax concessions that often support arguments to reduce the concessions. Instead, what are needed are longer-term forecasts to assess the proper policy settings for the tax concessions,” Slattery said.
SPAA stated that an expenditure tax benchmark would be more appropriate for estimating tax concessions, since it has a greater focus on the provision and taxation of superannuation benefits rather than the tax forgone for the concessions.
The comments are part of an ongoing campaign conducted by SPAA over recent years to lift superannuation balances, one which includes extensive lobbying of both sides of politics to raise contribution caps.
SPAA technical and professional standards director Graeme Colley said this had been an issue for some time. The association would continue to remind both sides of politics of the impact on the balances of superannuants brought about by the failure to adequately adjust superannuation tax concessions.
