In its pre-Budget submission, superannuation body ASFA said the government should look at adjusting the tax settings from superannuation for those on a high income or with a high account balance.
ASFA said the government should link the threshold for the additional Division 293 tax on concessional contributions to the top personal marginal income tax rate plus an additional amount to take into account compulsory superannuation contributions.
“For financial year 2023-24 it is proposed that the threshold for the Division 293 tax be $200,000, that is the threshold for the top personal tax rate of $180,000 with a further $20,000 allowance for compulsory superannuation contributions,” the submission stated.
“In later years the threshold for the Division 293 could be adjusted in line with any changes to the threshold for the top personal tax rate and for changes in the rate of compulsory superannuation. For example, the threshold for the top personal rate is legislated to increase to $200,000 from 1 July 2024.”
Linking the Division 293 threshold in this way would mean that no further indexation arrangements would be required, the submission noted.
“ASFA estimates suggest that in excess of $700 million a year would be raised in additional Division 293 tax if the threshold was lowered as described above,” the submission stated.
This figure differs from estimates provided by the FSC which estimated the measure would raise $620 million per year.
ASFA also noted in its submission that there are at least 11,000 superannuation fund members with balances of over $5 million according to the Retirement Income Review Report.
“Some of these funds have balances of some hundreds of millions of dollars, well in excess of retirement needs,” the submission stated.
“While the current caps on superannuation contributions limit the ability for members to build up excessive balances in the future there is a real question regarding the appropriate treatment of high balances that were achieved in the context of more generous contribution caps in the past.”
The submission stated that while the transfer balance cap regime limits the amount a member may take into pension phase, excessive balances may still be present in accumulation accounts and therefore subject to a tax concession of up to 30 per cent of the tax on earnings.
The submission stated that a balance of $5 million in concessionally taxed superannuation “cannot reasonably be justified as necessary to support a comfortable lifestyle in retirement.”
ASFA has estimated that introducing a $5 million cap on the amount that an individual could hold in superannuation would lead to additional revenue of around $1.5 billion a year.
This figure also differed substantially from the amount estimated by the FSC and DeltaPearl Partners, which calculated it would raise approximately $1.15 billion per year.
ASFA noted that the exact amount raised would depend on how excess balances were invested after they were withdrawn from the superannuation system.
The SMSF Association previously said it opposed the idea of a cap on superannuation measures, stating that any proposal to restrict extremely large balances in superannuation should be handled carefully.
SMSF Association chief executive John Maroney said any changes to the rules should allow adequate time to manage the restructuring that is involved, especially where large illiquid assets are involved.
