Leading tax expert Paul Tilley has criticized the backlash from wealthy Australians against Labor’s plan to adjust super concessions for balances exceeding $3m. Tilley, a former senior Treasury official, highlighted the equity issues within the super system that necessitate reforms to address the imbalance.
Since Labor’s electoral win, there has been a surge of opposition in major newspapers to the proposal, which targets the top 0.5% of super balances, affecting approximately 80,000 individuals. Despite claims that the plan would stifle entrepreneurship and various industries, experts argue that the adjustments are essential for creating a more equitable and sustainable super system.
The proposal has faced criticism for its unique approach of taxing notional changes in super balances annually, particularly affecting those with assets like farmland or business properties in self-managed super funds. However, Tilley dismissed concerns about taxing unrealized gains, emphasizing the necessity of addressing the generous tax breaks at the top end of the super scale.
While some experts raise concerns about the lack of automatic adjustments for inflation or wage growth in the plan, others like David Knox, a distinguished actuary, support the proposal’s fairness but suggest indexing the $3m threshold. Knox advocates for measures to ensure the system’s fairness and address excessive benefits received by some superannuation holders.
International best practices suggest taxing super benefits upon retirement rather than during the accumulation phase, indicating a need for structural reforms in the super system. Suggestions have been made to limit super balances or tax income in retirement at marginal rates to promote a fairer distribution of benefits and wealth.
Despite the polarized opinions and criticisms surrounding Labor’s super plan, experts emphasize the importance of addressing the existing inequities and inefficiencies in the superannuation system. The ongoing debate reflects a broader discussion on tax reform, wealth distribution, and the sustainability of Australia’s financial landscape.
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