8 May 2012: The Federal Government’s decision to defer the start date of the $50,000 concessional cap for individuals over 50 and with an a superannuation account balance under $500,000 for two years is bad policy that has the long-term potential to undermine Australia’s savings and retirement scheme, says the SMSF Professionals’ Association of Australia (SPAA) CEO Andrea Slattery The decision, described by Mrs Slattery as a “myopic tax grab”, had been mooted before the Budget was handed down by Treasurer Wayne Swan in Canberra tonight, but SPAA had been hopeful wiser heads would have prevailed and the decision changed in the face of widespread industry opposition to this revenue measure. “Unfortunately this wasn’t the case,” says Mrs Slattery, “and now we have this measure, which when coupled with the decision to introduce a 30% contributions tax for people earning over $300,000 a year, means we have revenue measures that do not fit with either the superannuation or tax systems, as well as acting as a significant disincentive to anyone who wishes to fund their retirement.” Mrs Slattery says SPAA doubts the ability of the proposed measure to raise the net revenue indicated over the forward estimates. “High income earners who are able to afford sophisticated tax planning advice will enter into activities with the objective of minimising their taxable income to avoid the impact of the measure, in the process undermining the confidence of all Australians in superannuation as the main savings vehicle for their retirement. “It’s SPAA’s strong contention that this measure is the thin edge of the wedge, and that the deferring of the $50,000 concessional cap will be extended beyond 2014 and the contributions tax will continue to fall to tackle future budget surpluses. ‘In relation to the deferring of the $50,000 start date for two years, SPAA believes it will particularly affect people with broken work patterns such as women and will inevitably put more pressure on the pension system. “In SPAA’s opinion what the Government naively sees as one-off revenue measures will have the effect of encouraging taxpayers to seek low-taxed investments outside of the regulated superannuation sector, diverting money into unproductive assets such as negatively geared property and other tax advantaged arrangements, instead of superannuation that supports productive investments and contributes significantly to our economy. “The difference between savings in super and outside super is that superannuation savings provide long-term capital and a ready access to equity capital for Australian corporations (which helped Australian companies recapitalise post GFC). Saving outside of super, such as by increased geared property investment, does not provide such capital.” Mrs Slattery says these tax measures also unfairly looks at an individual’s single year of income in isolation at a time when contributions may be made at
a higher rate compared with other years where a person may not be able to contribute. Workers in the resources industry and primary producers, who commonly experience large variations in annual income, are good examples. It would be more appropriate to consider a person’s lifetime income. “In a similar vein, it will negatively affect savers at their peak earning capabilities that have been unable to adequately save for retirement due to broken income earning patterns such as professional women, small business people, and the self-employed.” About SPAA SPAA is the voice for the SMSF sector and represents those professionals providing advice in the highly complex area of SMSF advice and is an advocate of high professional standards and competence.