FSC heads-off super tax measures

Mike Taylor

Managing Editor/Publisher, Financial Newswire

13 October 2022

Lower superannuation concessional contribution caps, placing a $5 million cap on superannuation balances and introducing a 15% flat tax on all earnings in retirement would deliver minimal benefits to the upcoming Federal Budget, according to research commissioned by the Financial Services Council (FSC).

The research, conducted by DeltaPearl Partners, examined a range of Budget measures canvassed over recent years and concluded that they would not deliver a sustainable Budget position, adding just 1.4% to Budget revenue.

Commenting on the research findings, FSC chief executive, Blake Briggs said piecemeal superannuation taxes would raise only $8.5 billion in the context of a Government that collects over $560 billion annually in revenue.

The brief handed to DeltaPearl Partners covered six measures selected by the FSC “from various proposals mooted in the media, the financial services industry and policy circles.

The modelling found three of the six measures produced relatively modest increases in tax receipts, specifically:

Measure 1: Introduction of a $5 million limit on total superannuation balances. Individuals with a total balance (across all super accounts) above this amount will be required to withdraw from super to bring their total balance below $5 million.

Measure 2: Reducing the tax concession on pre-tax contributions. By reducing the $27,500 annual cap on pre-tax contributions to $15,000 and reducing the $250,000 Division 293 tax threshold to $200,000.

Measure 3: Introduction of a flat tax on all earnings in retirement at 15%. Currently only income on balances exceeding the transfer balance cap are taxed at a 15 per cent rate.

By comparison, the modelling found that three other measures would result in gains in equity to the system:

Measure 4: Progressive tax settings on superannuation contributions. Replace the flat tax rate paid on superannuation contributions with a progressive tax rate linked to income. Employer superannuation contributions would be treated as individual income that is taxed at marginal personal income tax rates less a flat-rate refundable 20 per cent tax offset.

Measure 5: Inclusion of superannuation contributions within the government paid parental leave (PPL) scheme

Measure 6: Broaden the coverage of the Superannuation Guarantee to platform-based gig workers.