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Auditor proposes 2 alternatives to $3m cap to protect economy
A leading auditor suggests that rather than introducing the $3 million super tax, the government has two alternative options to generate more income.
Naz Randeria, managing director of Reliance Auditing Services, noted that while the government argues its plans to double the tax rate for superannuation earnings above $3 million and introduce a tax on unrealised capital gains are necessary to enhance the federal budget and promote fairness in the superannuation system, there are other viable options available to the government that could minimise the significant impact on the Australian economy.
“The government expects the changes to bring in an extra $2 billion a year, however, this fails to take into consideration what will happen if people start to change their approach to superannuation,” she said.
“It’s not unrealistic that of the 80,000 people expected to be impacted by these proposed measures, those who can, will shift their superannuation balances to different structures and taxation environments resulting in reduced government revenue in years to come.”
Randeria emphasised that these proposed changes could create a finite tax situation, leading to future budget challenges.
Instead, she recommended two alternative options that would generate sustainable increased revenue while ensuring fairness in the system.
The first option is to marginally increase the tax rate on superannuation by 1 or 2 per cent, maintaining a concessional tax environment lower than the marginal tax rate without affecting people’s standard of living.
The second option is to adjust the rate or broaden the scope of GST, which has remained unchanged for decades.
“Implementing either of the above changes would allow the government to collect increased revenue well into the future, and importantly, would spread the burden across all Australians, rather than the current argument of pitting the ‘rich’ against the ‘poor’,” Randeria said.
“Such changes would also provide extra flexibility for the government to potentially reduce personal income tax, or use the consistently increased revenue to fund infrastructure, innovation, health, and the like.”
Randeria said these suggestions aren’t “radical” and in fact were recommended by the International Monetary Fund for making better use of indirect taxation.
“I believe that ignoring sound economic advice to push ahead with the proposed changes to superannuation will not only result in lower-than-expected revenues in years to come, but the government will find itself with increased spending on the age pension, as people will no longer be encouraged to be self-sufficient in retirement,” she said.
“And should both those predictions come to fruition, we should all be concerned about what changes the government will consider next.”
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