Andrea Slattery
The methodology used to measure superannuation tax concessions is “fatally flawed” and, as a consequence, misinforms the debate around retirement income policy, says the SMSF Professionals’ Association of Australia (SPAA).
SPAA CEO Andrea Slattery says: “Measuring the concessions as tax expenditure using a comprehensive income benchmark is misleading and biased against concessions because any derivation from income being taxed at a taxpayer’s marginal tax rate is regarded as a cost to government revenue.
“This ignores superannuation’s primary purpose, providing retirement income and decreasing reliance on the Government for retirement income support.”
Mrs Slattery says while the current methodology is “theoretically correct” under a comprehensive income benchmark, it fails to include future government savings from reduced spending on the age pension or tax revenue gained from earnings of superannuation investments or benefits taxed on withdrawal.
“SPAA believes this skews the debate regarding the level of concessions and the appropriateness of concessional taxation of superannuation contributions as an incentive for people to save for their retirement.”
She adds that the short-term budget forecast figures that use four-year revenue estimates for changes to the concessions and a similar focus of the Tax Expenditure Statements on single income years is the wrong way to assess superannuation concessions.
“These short-term costings create myopic views of the superannuation tax concessions that often support arguments to reduce the concessions. Instead, what are needed are longer-term forecasts to assess the proper policy settings for the tax concessions.
“SPAA recommends that an expenditure tax benchmark be used to estimate the cost of the superannuation tax concessions.
“It would be more appropriate for estimating tax concessions as an expenditure tax benchmark has a more appropriate focus on the provision and taxation of superannuation benefits rather than the tax forgone for the concessions.”
