One of Australia’s three major accounting bodies is concerned the government has elbowed good policy principles out of the way in its push to implement an additional tax on super balances of $3 million and more.
The Institute of Public Accountants said that the government has failed to work properly with stakeholders to ensure that new rules are uncomplicated and do not create uncertainty for those planning for their retirement.
tAIPA general manager of technical policy Tony Greco said that Parliament will introduce a bad law but nobody seems to care about it because it impacts people with a super balance of more than $3 million.
The introduction of the new tax means super balances exceeding $3 million have any additional growth taxed by 15%, and Greco said that the IPA hoped the amount would be indexed so the number of people impacted by the change would not grow over time.
One of the concerns raised by Greco is that unrealised gains will be taxed, and that could create cash flow concerns for funds in a climate of market volatility when asset values are bouncing around.
“Volatility around asset values can fluctuate wildly from year to year which can result in little similarity between the actual gain made when realised, versus any tax paid whilst the asset was held based on the movements in its unrealised value over time”, Greco said.
“There is a good reason why this established principle is adhered to and that is, it follows the money. In most cases when assets are realised there are proceeds to deal with any resulting tax liability.
“What makes the proposed policy even more flawed is that there is no automatic refund of tax paid when the unrealized amount turns negative.”
The IPA also expressed concern about the two-week consultation period, and that it appeared to reflect a lack of preparedness of policymakers to listen to alternatives.
Greco and various industry colleagues also appeared before the Senate economics legislation committee, and he said that concerns fell on deaf ears.
“Whilst individuals who have amassed a super balance in excess of $3 million should consider themselves fortunate, it should not be acceptable because this cohort only represents .05% of the population that proper tax law design around efficiency, fairness and equity should be ignored,” Greco said.
“All new tax measures need to be appropriately designed and implemented to achieve the intended policy objective within the principles of good law design. Sadly, this point never got off the ground.”
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