Australia’s budget was a disappointment for asset managers, according to the Financial Services Council (FSC). The government disagrees, saying its policies have improved fairness, sustainability and efficiency in superannuation.
Asset managers, like many who run companies, expected a tax cut in the budget, says Martin Codina, director of policy at the FSC.
The lack of a tax cut and an increase in the final withholding tax on income to 15 per cent from 7.5 per cent, which mostly applies to property and infrastructure investors, may damage the prospects of potential investment in Australia and hinder further development of the fund management industry, says Codina.
“There is nothing in this budget that is particularly positive for asset management,” he says. “Savers across the board have been penalised.”
Codina is also a critic of the government’s decision to halve the concessional cap that applies to those aged over 50 and doubling the contributions tax for people earning more than $300,000. He says such policies may have a negative effect on savings and undermine confidence in superannuation.
The Minister for Financial Services and Superannuation, Bill Shorten, rejects such criticism.
“This reform will only reduce the tax concession which very high-income earners receive on their contributions to superannuation,” says Shorten in a statement.
“The 15-per-cent flat tax on earnings within superannuation provides high-income earners with a significantly larger tax concession than those on lower marginal tax rates.”
From July 1 workers with incomes up to $37,000 will receive up to $500 for their superannuation savings to ensure they pay no tax on superannuation guarantee contributions.
Shorten says the start date of the higher concessional contributions-cap measure will be postponed to July 1, 2014.
Under the scheme individuals aged 50 and over with superannuation balances below $500,000 will be able to make up to $25,000 more in concessional contributions than allowed under general concessional contributions cap.
The two-year deferral means that for the financial years 2012 to 2013 and 2013 to 2014 all individuals will be able to make concessional contributions of up to $25,000 per year as permitted under the general concessional cap.
In the financial year 2014 to 2015, the general cap is likely to increase to $30,000 through indexation and the higher cap will commence at $55,000.