$3m super threshold must be indexed to stop ‘bracket creep by stealth’
The $3 million threshold at which superannuation balances will be hit with additional tax should be indexed to prevent “bracket creep by stealth”, Australian Retirement Trust chief executive Bernard Reilly says.
Mr Reilly told The Australian Financial Review Super & Wealth Summit that the proposal to double tax on earnings in accounts with balances above $3 million to 30 per cent was reasonable, but the threshold should increase over time to account for inflation or wages growth. Otherwise, a growing number of people would be caught by the change.
ART chief executive Bernard Reilly says $3 million super balances will be common in 40 years’ time. Elke Meitzel
“The challenge I have with current policy is, I actually think it needs to be indexed because otherwise it is bracket creep by stealth,” Mr Reilly said.
If the threshold was indexed, the government would recoup less than the $2 billion a year it expects once the policy is fully implemented in 2025.
Mercer chief executive David Bryant said additional revenue generated by the tax increase should go to supporting low-income workers, women and people with broken work patterns, who typically have lower superannuation balances.
“We shouldn’t be comfortable that some people are stepping into retirement with a $90,000 balance, that the concessions are the same for someone who’s got 10 times as much,” he said.
“We’ve got people who are perhaps getting too much benefit and people that aren’t getting enough,” he said.
“One of the things to look out for, for all of us, as we make adjustments to the system, is how are we repurposing the benefit of that adjustment, not just extracting it from the system?”
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