Industry warning on tax rises
"The funds would have to attribute to individual tax file numbers earnings on every product they sell," one source said. "It would be an administrative nightmare. Right now funds can apply the same tax rate across the entire pool. It could probably be forced through, but it would have unintended consequences."
The industry could more easily live with a higher tax rate on all fund earnings.
The government had been considering boosting the tax on the super fund earnings of high earners from 15 to 30 per cent. The change would net it between $500 million and $1 billion a year.
An alternative proposal - boosting the earnings tax on all super accounts from 15 to 20 per cent - might raise $4 billion a year, and much more over time as fund balances climb.
The calculation is based on the long-term super fund return of 6 per cent per year. But fund earnings are uneven. Many will report losses when they next pay tax, meaning the higher tax rate on earnings would cost the government money because it would be offset at a greater rate against the tax on super contributions.
Treasurer Wayne Swan is understood to be reluctant to increase super taxes across the board, and is continuing to look for ways that cut concessions for the high earners.
Treasury calculations show that in 2009-10 the top 1 per cent of earners received an average super tax concession of $19,200. Middle earners got $800. Mr Swan began attacking concessions for high earners in last year's budget, taxing the contributions of Australians earning more than $300,000 at 30 per cent rather than 15 per cent.
Frequently Asked Questions about this Article…
The government has been weighing options including taxing the super fund earnings of high earners at 30% instead of 15%, or raising the earnings tax on all super accounts from 15% to 20%.
Industry sources say it would be nearly impossible to administer because funds would have to attribute earnings to individual tax file numbers for every product they sell, rather than applying the same tax rate across the whole pool — an administrative nightmare.
Treasury estimates boosting the earnings tax on high earners from 15% to 30% could net about $500 million to $1 billion a year, while increasing the tax on all super earnings from 15% to 20% might raise roughly $4 billion a year.
The revenue calculations are based on a long‑term super fund return of 6% per year, though actual fund earnings are uneven from year to year.
Yes. Because fund earnings fluctuate, many funds may report losses in some years. In those years a higher earnings tax could be offset against the tax on contributions and potentially cost the government money, according to the article.
The article says Treasurer Wayne Swan is reluctant to increase super taxes across the board and is looking instead for ways to cut concessions for high earners; he previously taxed contributions for those earning over $300,000 at 30% rather than 15%.
Treasury calculations cited in the article show the top 1% of earners received an average super tax concession of $19,200 in 2009–10, while a middle earner received about $800, indicating larger concessions flow to high earners.
The industry indicated it could more easily accept a higher tax rate on all fund earnings (for example, moving from 15% to 20%) rather than a targeted, individually attributed tax on high earners’ fund earnings.
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