The SMSF Association chief executive, John Maroney, has lambasted a proposal to scale back tax concessions for large self-managed superannuation funds (SMSFs).
Tuesday’s AFR Super & Wealth Summit seemed to strike a consensus that concessional taxation should only apply to fund balances of $5 million or less.
But John Maroney claims such changes would break one of Labor’s election promises not to touch superannuation:
“We do not and have never supported a cap on superannuation balances”…
Mr Maroney said constant changes to the superannuation tax settings eroded confidence in the system and discouraged members from making long-term savings plans.
Cutting on back on tax concessions paid to people with large SMSFs could raise billions a year, and could help to reduce the structural budget deficit, which is currently estimated at around $50 billion a year.
As noted by Financial Services Minister Stephen Jones at the Summit, there are 32 SMFS with assets of more than $100 million, with the largest SMSF having $400 million in assets.
These 32 SMSFs alone cost taxpayers about $200 million a year in taxpayer-funded concessions, thanks to the 15% tax rate applied to earnings and contributions, which is well below the top marginal income tax rate of 45%.
Australia’s superannuation system was never intended to be a tax dodge for the rich. And no logical person can argue that even $5 million, let along $100 million, in superannuation savings is needed to fund a dignified retirement.
In this regard, the Albanese Government should instead apply the Grattan Institute’s proposal to cap concessional superannuation balances at $2 million, which it estimated would raise $2.8 billion per year for the federal budget and would only impact around 80,000 people.
Remember, the Australian Treasury’s Tax Benchmarks and Variations Statement 2021-22 revealed that the budgetary cost of superannuation concessions had swelled past $40 billion, and is expected to grow over the forward estimates:
Treasury’s Intergenerational Report also projected that the cost of superannuation concessions will overtake the cost of providing the aged pension by around 2040:
Meanwhile, the Retirement Income Review found that superannuation concessions are poorly targeted to high income earners, thus increasing inequality:
Thus, Australia’s superannuation system is swallowing the federal budget while increasing inequality. It is a monster that must be tamed.
