MEDIA RELEASE: The Financial Advice Association Australia (FAAA) broadly supports the intent of Treasury’s Better targeted super concessions consultationpaper to ensure the superannuation tax concessions available to all Australians are fair, reasonable and equitable. However, it has raised concerns about the impact of some of the proposals.

Sarah Abood, CEO of the FAAA, says: “We are open to the principle that those with very substantial superannuation balances would not have unlimited access to the tax concessions on superannuation earnings.

“However we have reservations about the impact of some of the proposals, and any unintended consequences.”

In its submission to Treasury, the FAAA highlighted four key areas:

• Complexity – the proposal will introduce a new separate set of laws to the system with a new complex formula for calculating an individual’s earnings that will be subject to the additional tax rate and tax liability. The FAAA says that consideration should be given to aligning the new measure to existing superannuation and taxation laws as much as possible.
• Threshold – to ensure the equity of the system is maintained over time, the FAAA believes the proposed superannuation earnings concessional tax threshold should increase to keep pace with wage increases. The FAAA recommends threshold be higher than $3 million and indexed in line with increases in the CPI to provide greater certainty for consumers over the long-term.
• Tax rate – the FAAA is concerned that, in reality, the impact of the proposed increase in the tax rate will be substantially more due to a number of factors including the taxing of unrealised gains, the lack of access to the one third Capital Gains Tax discount that applies to super funds and the lack of access to the benefit of franking credits that would otherwise be available to super funds. The FAAA recommends that the increased tax rate be reduced to a level materially below 30 per cent, to avoid creating a significant disincentive for Australians to invest in their superannuation in their earlier years in the workforce.
• Unrealised gains – the FAAA is concerned that the proposed formula, which includes unrealised gains in the year's earnings, would result in Australians being required to keep their money invested in what might be a higher tax environment than is optimal, and losing the many benefits of deferred consumption that the superannuation system encourages.

“Priority should be given to identifying solutions to these issues, in order to improve the short and long-term certainty for consumers regarding proposed changes to the superannuation tax concessions,” Ms Abood says.