The Association of Superannuation Funds has swung in behind the Gillard government over its changes to super, labelling as “fiction” claims they might hit accounts with modest balances.Australians receiving income from accounts earning than $100,000 per year will from mid 2014 year face a tax on the excess earnings of 15 per cent, instead of zero as at present.
The Treasury says only around 16,000 Australians will be affected. Investment advisors say many more will be hit in unusually good years.
The Treasury calculation is based on a fund return of 5 per cent per year. In the past year the best-performing balanced funds have returned between 11 and 15 per cent.
But Association chief executive Pauline Vamos says this won’t mean many more people will be drawn into the net.
“These claims are misleading,” she said. “Fund members should not confuse the amount of investment earnings credited to their account with the amount reported to the Tax Office”.
Earnings from capital gains made selling property or shares that are already in funds will be exempt from tax for the next ten years. Other earnings from dividends, rents and interest payments are typically at or below 5 per cent.
“Given the carve out of capital gains, the amount of assessable income reported to the Tax Office for the purposes of assessing the proposed tax is unlikely to exceed five per cent of account balance for the next decade in almost all cases,” she said...
Even an Australian with an account balance of $1 million and a reported return of 15 per cent would be unlikely to suffer.
“We need to sort fact from fiction. Confidence can be adversely affected by speculation that is not consistent with the facts,” she said.
Leading actuary Michael Rice said the measures announced by the government would be difficult but not impossible to administer.
“For people such as politicians in defined benefit schemes, the funds will need to create nominal accounts and calculate notional earnings,” he said.
“Including these people is only going to collect $6 million over four years. You have to wonder whether it is worth the effort.”
“It would be easier for politicians to sacrifice some of their salaries.”
Much more difficult was the promise made in the last budget to include politicians in the scheme that taxed the super contributions of high earners at 30 rather than 15 per cent. So difficult was that to legislate that one year on no legislation had been produced.
In The Age
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