Labor’s proposed changes to super concessions are “a step in the right direction” but the costs to industry and the ATO would outweigh the benefits, argues Rice Warner.
In a new Insights report, Rice Warner has argued that the "gradual" nature of Labor's proposed tax changes would cause "more pain" than an immediate movement to the best policies.
Rice Warner consultant Nathan Bonarius said the pain would come as a result of increased costs borne by the superannuation industry and the tax office.
Labor has proposed that tax income products above $75,000, which are currently tax free, be taxed at 15 per cent.
Higher income earners will also be taxed at a higher rate of 30 per cent with the threshold brought down to $250,000 from the current $300,000.
Rice Warner argued that such changes will diminish the benefits of the underlying policy.
The difficulty associated with collecting member information across multiple accounts and aggregating their earnings position is a foremost obstacle.
Ensuring members do not ‘game’ the system is also a challenge, Mr Bonarius said.
Mr Bonarius suggested that a flat rate of tax on retirement and accumulation investment earnings is a better approach.
“Whatever the outcome, policymakers should stop making frequent band-aid changes, and, with bilateral support, go about building a coherent and sensible retirement incomes taxation policy.
“The [government's] tax white paper is a chance to look at simplifying the administration of superannuation and setting a long-term structure which will bring certainty to financing the aged for the first time,” Mr Bonarius said.
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