KPMG Partners Paul Howes and Damian Ryan comment on draft superannuation legislation.
Paul Howes, Partner and Head of Wealth Advisory, KPMG, said:
“The proposed reforms are fair, simple to implement and long overdue. There has been a lot of industry debate on the proposed definition of super, but I think the government’s wording achieves a satisfactory compromise. It clarifies that superannuation is meant to help fund a person’s retirement: it is not for unlimited wealth accumulation.
Such an agreed objective, enshrined in legislation, will provide a mechanism for evaluating the performance of the system and all proposed policy reforms. I believe it will enhance confidence and stability in our super system.
Crucially, this should continue to add momentum for the development of additional retirement products and services to retirees. The real issue for the industry is the fundamental change of emphasis that is needed from the accumulation phase to retirement incomes.”
Damian Ryan, Superannuation Tax Partner, KPMG, said:
“Today’s changes are welcome from both a tax equity and superannuation coverage perspective.
The current low income tax contribution was legislated to be abolished from 30 June 2017. The new Low Income Superannuation Tax Offset (“LISTO”) effectively restores this provision, and so is a good and fair proposal. Without a low income tax offset, low income earners would pay more tax in superannuation than if they had earned the income directly.
In another welcome development, although the LISTO is referred to as a “tax offset”, this is not the case from an income tax perspective. Superannuation funds would have had a significant compliance burden in determining which of its members qualified for a tax offset, as they would have had to know members’ taxable incomes for the year. But making the payment directly to the individual (or by their direction to their superannuation fund) “offsets” the tax detriment of the tax paid in the fund for concessional contributions for low income earners, without causing a significant compliance burden to the Fund. Treasury should be congratulated for listening to the industry feedback.
Similarly, the proposed changes in relation to deducting personal contributions are welcomed from a coverage perspective, as it improves the ability of more Australians to make personal contributions to their superannuation. Under existing rules, people whose employers do not allow them to make salary sacrifice contributions or those who are substantially self-employed but with greater than 10% of their income from employment, are disadvantaged”.
Paul Howes added: “The LISTO proposal will assist in ensuring equity, particularly for women who have been disadvantaged to date within the system and it warrants bi-partisan support in Parliament.”
Senior Communications Manager, KPMG
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