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Contributions cap a turn-off for savings, says BDO
Contributions cap levels are not incentivising members to save for their retirement, according to BDO Australia.
The association of independently-owned accounting practices, in a 2013-14 pre-Budget submission to Treasury, has called for an immediate review into the capping of superannuation contributions.
A survey conducted by BDO found that the level at which contributions caps were set did not incentivise Australians to save for retirement.
BDO said if contributions caps were retained, the Australian Taxation Office (ATO) should review the deductibility of personal superannuation contributions to remove the substantial self-employed test.
Retaining the capping of concessional contributions on an "all sources" basis discriminated against those who were self-employed for part of the year and employed for the balance, and those whose employers did not offer the opportunity to make additional salary sacrifice super contributions, according to BDO.
"There appears to us to be no rational policy or affordability reason to maintain this rule. It is a 'dinosaur' of the tax legislation that illustrates the need for real, focused, principles-based reform," it said.
High income earners with two unrelated employers were also punished by the interaction between the superannuation guarantee legislation and concessional superannuation capping measures, according to BDO.
It said the person would attract excess contributions tax liability upon the required superannuation guarantee contributions for both companies.
"The imposition of a punitive tax that is unable to be avoided reduces confidence in the integrity of the system," it said.
The BDO survey also found that members did not appreciate the continual "tinkering" with the superannuation tax system.
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