Superannuation and accountancy groups are protesting the Government’s consultation paper for new legislation that would allow super account holders to receive a once-off refund for breaching the concessional limits on contributions.
Groups including CPA Australia and the Institute of Chartered Accountants say the provisions do not go far enough and that super account holders should be able to access refunds at any time for breaking their caps.
Superannuation spokesperson Liz Westover says the institute’s submission, which is set to be delivered to the Government tomorrow, will state that although the discussion paper is a step in the right direction, it does not go far enough.
“The basic premise is that yes, it is a step in the right direction. But it doesn’t address the problem of excess contribution caps,” she says.
“In most cases this is an inadvertent error. We think anyone who breaches the caps should be entitled to a refund no matter what the value is.”
In a submission compiled by the Australian Institute of Superannuation Trustees, chief executive Fiona Reynolds stated the refund should be made ongoing, that indexation be applied and that measures be put into place to ensure that one-off refunds can’t be used to facilitate the movement of illegal funds.
It also raised a number of concerns with regard to high income earners, stating that the tax rate on amounts over the cap are the same as the highest marginal tax rate.
“It must be emphasised that given this lack of a difference where one is on the highest marginal tax rate, there is no discernible disincentive in contributing to superannuation in excess of caps.”
“AIST recommends again this measure should be made available on an ongoing basis as an attractive option designed to reduce misuse of the superannuation environment, in particular, where taxpayers are on the highest marginal rate of tax.”
CPA Australia has also stated that superannuation refunds must be made on an ongoing basis.
The Institute of Chartered Accountants has also stated that on top of the new rules being too restrictive, they don’t address “the fundamental flaws of concessional caps”.
“I think when you’re talking about these caps, the fact there is an ongoing annual cap misses the point that not everybody is going to be able to contribute the maximum amount to their cap throughout their working lifetime,” Westover says.
“There should be provisions in the caps for that. If you’re paying a mortgage, you can’t make full contributions and so on, which happens to many, many people, you should be allowed to catch up later.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
