More scope to target high super balances says ASFA

There is a strong case for both further limiting the superannuation tax concessions for those with high balance or high incomes, according to the Association of Superannuation Funds of Australia.

As well, ASFA has signalled a nuanced shift in its view of the taxation of unrealised capital gains.

ASFA has told a Parliamentary Committee reviewing the Australian taxation regime that while measures have been put in place to limit concessions to those with high balances, there is room to go further.

It said there were still some gaps and inconsistencies in the pattern of tax concessions, with those on incomes of between $37,000 and $45,000 receiving only a very small concession, and with some individuals on the top marginal tax rate receiving a realtively large tax concession.

“Those with relatively large superannuation balances also receive tax concessions through investment earnings being taxed at the rate of 15 per cent during the accumulation phase and at a zero rate in the pension phase,” it said.

“Measures put in place to limit the tax concession for those with high balances have included the introduction of the Transfer Balance Cap, which limits the amount of superannuation in regard to which an individual can have investment returns taxed at a zero tax rate, and limits on contributions which can be made by those with high account balances.

“There also are measures which allow individuals with low account balances to make contributions in excess of the usual annual caps.”

“There is a strong case for both further limiting the superannuation tax concessions for those with high balances and/or high incomes and assisting further those on low incomes with generally low balances. ASFA has consistently advocated for such measure,” the submission said.

Pointing to the proposed Division 296 taxation of individuals with very high superannuation balances, ASFA noted that a number of commentators have suggested that unrealised capital gains be excluded from the calculation of the Divison 296 tax liability.

“However, such an approach would involve substantial challenges in being implemented and would lead to high administration and compliance costs that would be disproportionate to the revenue collected from the tax,” ASFA said.

“ASFA in its past submissions on the proposed Division 296 tax has stated that this is an unorthodox approach in the context of Australian taxation arrangements, and one that should not set a precedent for the taxation of superannuation or personal income tax more broadly,” it said.

“However, the submission also indicated that ASFA accepts the rationale for use of this simplified, proxy calculation in this context to minimise the compliance burden and cost that might be incurred – and passed through to individual fund members – if all funds were required to determine, attribute and report, at the individual level, a more precise calculation of ‘earnings’ for Division 296 purposes.”