Publication date: 06 Nov 01 |
Source: THE TAX INSTITUTE
'The Taxation Institute is pleased the Liberal Party has adopted an element of the recommendation put forward by the Taxation Institute to ensure that superannuation taxes will not wear down the financial expectations of Australians by reducing the surcharge,' said Ms McCleary. 'However, the Taxation Institute continues to call on all political parties to abolish the superannuation surcharge and the 15% contributions tax.'
The appeal follows the Treasurer's refusal to consider reform of the remaining 15% on all contributions to superannuation funds, on the basis that he considers the 15% contributions tax 'incredibly complicated to unravel'. The Labor Party has promised a review of the contributions tax regime, but nothing on the super surcharge.
'The removal of both taxes will provide an effective and significant increase to Australia's level of superannuation savings. Over a period of time, this will result in a bigger tax base on which to levy the exit tax on superannuation, without increasing the rate,' said Ms McCleary.
The Taxation Institute has also cautioned that reducing the level of the surcharge would not reduce the ongoing costs of collection. The superannuation surcharge collection system is recognised as one of the most inefficient tax collection methods in Australia. Collection costs are estimated at $200 million and this will not change even if the tax rate is lowered. When compared with the Government's projected surcharge tax collections of approximately $400 million once the full rate reduction is in place, the appalling waste of resources in collecting and administering this tax is very clear.
Further, the Coalition's announcement to introduce quarterly superannuation contributions by employers will mean business will no longer be able to pay tax once a year, but will be taxed by the Government four times per year. This may cause a cash flow problem for many small businesses compelled to pay quarterly from 2003 – not to mention the further workload in dealing with the extra paperwork. Although that will bring forward short-term revenue for the Government, it does have the potential to indirectly and negatively impact on National savings.
'The Taxation Institute recognises both the reduction of the super surcharge to 10.5% by the Coalition, and the Australian Labor Party's plan to review the 15% tax on super contributions, but calls on both political parties to genuinely reform the superannuation system. All Australians deserve to look forward with confidence to a secure retirement.'