SMSF Association urges total rethink on TES

The Government needs to undertake a total rethink of how it assesses the costs of superannuation tax concessions, according to the SMSF Association.

The association has used its latest submission to the House of Representatives Standing Committee on tax and Revenue Inquiry into the Tax Expenditures Statement (TES) process to reiterate its concerns about the current methodology which it claims has served to distort public perceptions.

SMSF Association chief executive, Andrea Slattery said her organisation believed that the large estimates of the revenue forgone to Government due to the super tax concessions was leading to the simplistic observation that lower tax concessions would provide a substantial revenue gain to the Government when this was not the case.

"It's our contention that more scrutiny is needed when looking at the numbers, as well as considering alternative estimates of the super tax concessions cost to Government, to promote a better quality debate around this critical issue," she said.

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The SMSF Association submission argues for four key issues to be considered with respect to the TES — the use of a comprehensive income tax benchmark; the lack of behavioral change factored into its estimates; the estimates do not account for the long-term benefits of the super tax concessions (such as reducing Government expenditure on the Age Pension); and the misuse and misinterpretation of the estimates.

"To improve the TES costing of super tax concessions we suggest that Treasury undertake alternative estimates using a different tax benchmark, as well as factoring in the long-term savings it brings to Government," Slattery said.

"We believe that because reducing future dependence on the Age Pension is a key objective of the super system and the tax super concessions, it is inconceivable that our public policy measurements do not attempt to capture the value of the reduction of future Government expenditure created by the concessions."

"TES uses a comprehensive income tax benchmark that was established in the early 20th century, when tax concessions were less prevalent and the tax system simpler," she said. "Our compulsory super system was introduced in 1992 as the primary vehicle for retirement savings, and tax concessions are integral to a system that asks people to forgo the use of income today to have an adequate income in their post working lives."

She said that, on this basis, a new benchmark measurement was necessary that more accurately measured the current superannuation and retirement system in Australia.