These projections are drawn from Australian Taxation Office (ATO) statistics for 2019–20 and consider superannuation contributions, member account balances, and taxable incomes. The analysis involves assumptions such as a 2.5% inflation rate, a 7.5% annual return on super balances, and a 7% effective tax rate on earnings.
The decision on whether to apply indexation to the superannuation tax is crucial for its fairness, particularly affecting younger Australians. According to the FSC's scenarios, a $2 million threshold without indexation could mean over 1.8 million Australians face the impact by retirement. Conversely, different combinations of thresholds and indexation levels would affect fewer individuals, highlighting the importance of indexation in mitigating adverse effects such as reduced retirement savings.
Blake Briggs, CEO of the FSC, emphasized the influence of the government's decision on future governance, stressing the need for a balanced and consultative approach that considers various stakeholders’ input to sustain confidence in the retirement system. The debate centers on maintaining fairness and fiscal sustainability without undermining the principles underlying the superannuation system.
The FSC has urged the government and the Greens to engage in constructive dialogue and consider less contentious approaches to super tax, instead of pushing policies that predominantly impact younger Australians. The organization also critiqued the omission of indexation as a deliberate strategy, potentially harming future economic stability.
Moreover, the SMSF Association and other industry voices have contested the Treasurer’s assertion that no alternatives to the current proposal exist. They argue that more feasible solutions, aligning with traditional tax principles, have been sidelined. This includes advocating for the taxation of actual earnings beyond $3 million instead of targeting unrealized capital gains, which they consider more equitable and simpler.
Critics of the current model, including Tony Greco from the Institute of Public Accountants, also noted the disproportionate impact on the self-managed super funds (SMSF) sector compared to APRA funds, and highlighted inadequacies in the consultation process. As consultations continue, stakeholders like CA ANZ and the Institute of Financial Professionals Australia persist in recommending amendments to ensure the strategy aligns with the interests of all Australians.
