Andrea Slattery
The SMSF Association has called for a total rethink about how the Government costs superannuation tax concessions.
In its submission to the House of Representatives Standing Committee on Tax and Revenue Inquiry into the Tax Expenditures Statement (TES) process, the Association says “it has been a major concern for a long time that the TES measurement of super tax concessions distorts the public debate about superannuation”.
Association Managing Director/Chief Executive Officer Andrea Slattery says: “We believe that the large estimates of the revenue forgone to Government due to the super tax concessions leads to a simplistic observation that lower tax concessions would provide a substantial revenue gain to the Government.
“It’s our contention that more scrutiny is needed when looking at the numbers, as well as considering alternative estimates of the super tax concessions cost to Government, to promote a better quality debate around this critical issue.
Slattery says the Association’s submission focused on four key issues with the TES:
- The use of a comprehensive income tax benchmark;
- The lack of behavioral change factored into its estimates;
- The estimates do not account for the long-term benefits of the super tax concessions (such as reducing Government expenditure on the Age Pension); and
- The misuse and misinterpretation of the estimates.
“To improve the TES costing of super tax concessions we suggest that Treasury undertake alternative estimates using a different tax benchmark, as well as factoring in the long-term savings it brings to Government.
“We believe that because reducing future dependence on the Age Pension is a key objective of the super system and the tax super concessions, it is inconceivable that our public policy measurements do not attempt to capture the value of the reduction of future Government expenditure created by the concessions.”
She says that the TES uses a comprehensive income tax benchmark that was established in the early 20th century, when tax concessions were less prevalent and the tax system simpler.
“Our compulsory super system was introduced in 1992 as the primary vehicle for retirement savings, and tax concessions are integral to a system that asks people to forgo the use of income today to have an adequate income in their post working lives.
“We need a current benchmark and measurement to more accurately measure our current superannuation and retirement system in Australia.
“The ongoing debate about super tax concessions is serving to undermine confidence in the entire system, so it’s imperative to have a sound method of assessing the total impact of the super tax concessions to allow for a better informed public policy debate about our retirement income system.”
