The debate on tax in superannuation has become too narrow and polarised hampering progress towards an equitable system, a tax expert said.
John Randall, superannuation partner at Deloitte, said people were approaching the topic from various viewpoints, but that each one was focusing on different constricted areas of interest. He added the discussion needed to be broader as tax was tied up intrinsically with savings, social security, health and aged care, with any change to tax additionally having impacts on these, including potentially increasing the cost to the public purse.
“There are some passionate views and the discussion is ramping up with people taking positions at the ends of the spectrum rather than the middle ground. There are numbers given, but there is not context on how they are derived or what numbers are left out,” Randall said.
One of the numbers bandied about is the $32 billion loss to tax revenue because of superannuation’s concession, but Randall said the figure is based on “a whole lot of assumptions” and fails to take into account the benefit in social security savings.
He agreed, however, that tax in superannuation needs to be reviewed, but needs to take into account all the facets of the superannuation system.
“There needs to be a broader discussion that ties in with social welfare. It needs to have stability without inequality, providing individuals with adequate resources in retirement and alleviating the social security bill of an aging population.”
Randall has joined others in a call for a defined objective for superannuation to be put into legislation. In his opinion it should be to provide a sufficient retirement.
He proposed several potential tax options he felt worth considering including rebates, tax concessions and a cap on how much can be contributed tax free.
“If you made superannuation too de-incentivised people would look at their home and potentially would over-capitalise in it, but you don’t want the incentives to be too much so they don’t have anything in times of need.”
He added that the point of tax breaks in super was to incentivise people to save, and that they will always do what will give them less tax and more savings.
