Industry super fund calls for indexation for $3m super tax
Treasury should consider indexing the $3 million threshold for the new super tax and legislating a post-implementation review, says Australian Super.
Australian Super broadly supports the government’s proposal to introduce an additional tax on earnings on balances above $3 million but has urged Treasury to consider a number of amendments.
In a recent submission to Treasury, the industry super fund said the measure represented a “step toward rebalancing tax concessions in the superannuation system toward low and middle-income earners”.
However, the super fund said indexation of the threshold at which the measure applies would lead to greater certainty and promote stability and confidence in the system, which is important given the long-term horizon of superannuation savings.
“Members who are complying with the purposes of superannuation have a right to know how the earnings on their superannuation will be treated for tax purposes while it is compulsorily preserved,” the submission said.
Superannuation tax concessions are a key part of the superannuation system. Without indexation, as a greater proportion of the community reaches the $3 million threshold, it will be for future parliaments to consider whether or not to adjust the threshold.”
The submission noted that a number of other thresholds in the system linked to an individual’s balance or contributions are indexed.
This includes the transfer balance cap, the concessional contributions cap and the non-concessional contributions cap. Many payments and thresholds across Australia’s taxation and transfer system are indexed, it said.
The super fund said a requirement to conduct a post-implementation review three years after the measure first applies should also be included in the legislation.
“This review should encompass administrative arrangements to ensure that the lowest possible administrative costs are borne by superannuation members, and that administrative arrangements remain appropriate as more members become subject to the threshold,” the submission stated.
“While we remain of the view that the $3 million threshold should be indexed, in the absence of indexation of the $3 million threshold, this review should also be required to consider whether the threshold remains appropriate.”
Extending exemptions for structured settlements to TPD insurance proceeds
The super fund has also called for the treatment of a full exclusion for structured settlement contributions when calculating Division 296 tax liability to be equally extended to TPD insurance proceeds to TPD insurance proceeds from a policy paid into a member’s account that is held within superannuation.
“The exemption of individuals who receive structured settlement contributions from the Division 296 tax liability is appropriate. Structured settlement contributions are also excluded from the total superannuation balance calculation, and the total superannuation balance is reduced by the sum of a structured settlement contribution made at or before a time in respect of an individual,” it said.
Although payments from a superannuation life insurance policy are not counted as taxable superannuation earnings, they will count toward the total superannuation balance. They may cause a member to be subject to a Division 296 tax liability or an additional Division 296 tax liability.
“As the draft Explanatory Memorandum states, the treatment of structured settlement contributions reflects that these contributions are usually large payments that can provide the funds for ongoing medical and care expenses resulting from serious injury and income loss,” the submission said.
“We would welcome a modification to the draft proposed law as the treatment should also be extended to TPD insurance proceeds from a policy held within superannuation.”
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