FSC and ASFA at odds over Budget super tax settings
The Financial Services Council (FSC) and the Association of Superannuation Funds of Australia (ASFA) are at odds over the taxation of high balance superannuation accounts.
ASFA has produced a pre-Budget submission urging a $5 million cap on concessional balances, while the FSC has produced research arguing such a move would have minimal impact on the Federal Budget bottom line.
The ASFA submission claimed that introduce a $5 million cap on the amount an individual could hold in superannuation would lead to additional revenue of around $1.5 billion a year.
In fact, the big superannuation group said it had identified two priority areas for adjusting current tax settings for superannuation – the threshold on the imposition of addition tax on concessional contributions and earnings tax concessions on very large balances.
“In regard to the threshold for the additional Division 293 tax on concessional contributions ASFA is proposing that the threshold be linked to the threshold for the top personal marginal income tax rate plus an additional amount to take into account compulsory superannuation contributions,” the submission said.
“For financial year 2023-24 it is proposed that the threshold for the Division 293 tax be $200,000, that is the threshold for the top personal tax rate of $180,000 with a further $20,000 allowance for compulsory superannuation contributions,” it said.
“In later years the threshold for the Division 293 could be adjusted in line with any changes to the threshold for the top personal tax rate and for changes in the rate of compulsory superannuation. For example, the threshold for the top personal rate is legislated to increase to $200,000 from 1 July 2024.”
It claimed that in excess of $700 million a year could be raised in additional Division 293 tax if the threshold was lowered.
“One of the remaining concerns in relation to the sustainability of tax concessions within superannuation is the tax concession enjoyed in relation to investment earnings for high balance members. This tax concession can be substantial for large accounts. There are at least 11,000 superannuation fund members with balances within superannuation of over $5 million according to the Retirement Income Review report. Some of these funds have balances of some hundreds of millions of dollars, well in excess of retirement needs.”
“While the current caps on superannuation contributions limit the ability for members to build up excessive balances in the future there is a real question regarding the appropriate treatment of high balances that were achieved in the context of more generous contribution caps in the past.”
“The transfer balance cap regime limits the amount a member may take into pension phase. However, ‘excessive’ balances may still be present in accumulation accounts and therefore subject to a tax concession of up to 30% of the tax on earnings (that is, 45% personal tax rate less 15 % tax on fund earnings). A balance of $5 million in concessionally taxed superannuation cannot reasonably be justified as necessary to support a comfortable lifestyle in retirement.”
Agree, any Super Member with over $5 Mill balances can easily afford and should be paying more tax.
Get these excess funds out of the Super system and have the very wealthy pay some more tax above the current 15% rate they would be paying over their $1.6 Mill tax free.
Agree. But why not go more radical? Put an upper limit of all super account balances, including accumulation, at the TBC level.