The peak accounting body, Chartered Accountants ANZ (CA ANZ), is raising significant concerns about superannuation changes introduced in the Australian Parliament today.
Currently, earnings on money invested in superannuation are taxed at 15 per cent, while under changes proposed today this would double to 30 per cent for balances over $3 million.
The ‘changing of the goalposts’ would right now double the tax payable on superannuation for around 80,000 Australians who have followed the rules at all times.
And because they are not indexed, they set a tax trap which will capture more and more people in the future.
The Financial Services Council estimates that up to half a million Australians aged in their 20s and 30s could be impacted by the changes by the time they retire.
CA ANZ calculates, for example, that a 25-year-old young professional today earning $95,000 per year, about the average full-time wage, will be $90,000 worse off in retirement under the proposed changes.*
CA ANZ is calling on the Government and all Parliamentarians to strongly consider the unintended consequences of introducing these changes without indexation.
“It is simply not fair to shift the goal posts yet again on superannuation,” said CA ANZ Superannuation and Financial Services Leader, Tony Negline.
“These changes will unfairly impact on people who are in or approaching retirement who followed the rules, and are also a tax trap for young players.
“Today we are urging Parliamentarians to either pause, reject or amend this legislation – because it would be unjust to pass the Bill in its current version.”
The taxation of superannuation has faced many changes in recent years, including:
- Up until 2007 there were no limits placed on the amount of money you could invest in superannuation, while attracting a tax rate of just 15 per cent.
- In 2007 the rules changed, with limits placed on how much you could put into your superannuation account while attracting the favourable tax rate, but it was made tax free when you retired.
- In 2016, a new $1.6 million limit was placed on how much after-tax money you could deposit into superannuation.
- Then in 2017, the amount of tax you pay when you invest in super changed, with a new threshold introduced (you now had to pay 30 per cent not 15 per cent tax if you earned more than $250,000 instead of $300,000).
- In 2021 the threshold for how much you can put into superannuation was increased from $1.6 million to $1.7 million.
“It is our duty to make sure that amendments to legislation are fair and balanced – and today’s amendments deeply concern us,” Negline said.
“CA ANZ made submissions to the Treasury consultation paper as well as the exposure draft legislation in April and October 2023.
“We acknowledge the improvements and changes which have been made by the Government to date and look forward to continuing to work with the Government to refine the proposal.”
* Assumes a rounded salary of $95,000 per year, annual wage increases of 3%, a super fund earning 7% after tax per year, and a retirement age of 70.
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Chartered Accountants Australia and New Zealand represents more than 135,000 financial professionals, supporting them to make a difference to the businesses, organisations and communities in which they work and live. Chartered Accountants are known as Difference Makers. The depth and breadth of their expertise helps them to see the big picture and chart the best course of action.