Govt has put cart before horse on $3m super cap
Major accounting group CPA-Australia is claiming vindication for its warning that the Government should have delayed formulating the legislation around the $3 million tax cap until after it had legislated the objective of superannuation arguing that problems may now arise.
Referring to its earlier warnings contained in a submission filed with Treasury in February, CPA Australia said it felt at the time that the objectives of superannuation and retirement savings should have been defined first, and that any changes to superannuation thereafter should be consistent and holistic.
“We stand by our comments from that submission, noting that the changes proposed in that announcement – which include the unprecedented taxation of unrealised capital gains; the anomalous abandonment of threshold indexation; and the uncertain treatment of compliant superannuation funds with investment strategies which presently have little need for additional liquidity under the current rules – are large impacts which would have benefited from the additional scrutiny provided under an objective of superannuation,” the accounting group said.
“We also note that any changes to superannuation thresholds must not proceed in isolation. These changes must be considered as part of a broader discussion regarding superannuation tax, concessions provided, and the complexities created by the myriad of caps, thresholds and limits currently in place. Any discussions regarding superannuation reform must also consider the interaction with the tax and transfer system.”
Elsewhere in its response to the Government’s proposed approach to legislating the objective of superannuation, CPA Australia has also strongly taken issue with the notion that early release of superannuation should only be accessible as a last resort in the situations of permanent and temporary incapacity (including insurance payments), terminal medical conditions, compassionate grounds for specific expenses, and severe financial hardship.
“We have significant concerns that the role of insurance, and the linked roles of death, disability and terminal illness conditions of release, are minimised by the treatment of this as a ‘last resort’,” the CPA Australia submission said.
“Insurance is a vital part of superannuation, and we believe that Australians rely on the insurance benefits obtained with their fund membership, in many cases to the exclusion of all other sources,” it said noting that commentators had written extensively about the under-insurance problem.
“We note that various commentators have written about the underinsurance problem in Australia.”
“Australians view benefits payable from superannuation for death, illness and injury to be very much a first resort, not a ‘last resort’. We strongly recommend that the EM be amended to ensure that this is clear.”