Govt urged to legislate to eliminate 45% super tax conflict

Mike Taylor

Managing Editor/Publisher, Financial Newswire

5 October 2022

The Government needs to legislate to remove an apparent conflict between key the non-arms- length investment tax provisions and the best financial interests duty, according to the major accounting group, CPA Australia.

The accounting group said that failure to do so, carried with it the risk of some funds having their income taxed at 45%.

The group has used its pre-Budget submission to urge the formulation of an objective superannuation in circumstances where the retirement savings system also encompasses the Age pension, non-superannuation investments, including the family home, and aged care.

“We also note the increasing compliance costs for regulated superannuation funds,” it said. “In particular, CPA Australia has been, with other accounting, tax, financial advice, superannuation and actuarial bodies, in dialogue with both government and regulators regarding the 2019 expansion of the NALI/E provisions.”

“We consider the intent of the expansion to be correct. However, our overarching concern is that the ATO’s interpretation means that the rules could result in some funds having their income taxed at the non-arm’s length rate of 45%. It could also operate in conflict with a range of trustee obligations, including the newly enacted best financial interests duty (BFID) rule in the Superannuation Industry (Supervision) Act 1993.”

“We note that ATO relief in relation to these provisions is due to end in June 2023. Given the impact on APRA and ATO-regulated funds within the superannuation sector, legislative amendments are urgently required,” the CPA Australia submission said.

The CPA Australia submission also pointed out that the gender gap in retirement savings meant that women retire with smaller superannuation balances than men, which in turn means less financial security.

“Mothers are overwhelmingly more likely to take time off to look after children than fathers,” it said. “The Retirement Income Review investigated paying superannuation on parental leave and found it would help reduce the gap between men and women’s superannuation balances.”

“The Productivity Commission recommended paying super on parental leave. Continuing superannuation contributions at this time will reduce the impact of the gender gap in retirement savings.”