The new tax expenditure and insight statement and Labor’s proposal to put higher taxes on superannuation funds with more than $3 million of assets is sending people into a tizz.
It is also leading people to ask a lot of questions. This is good, but it is important to focus on the right questions.
A better question might be: “Are people at the top of the income distribution paying their fair share of tax?” ; others argue they are much higher because even low tax rates accumulate to very large tax rates when assets are held over long periods.It is obvious that superannuation is highly desirable in tax terms. That is why people put so much money into it.
The second question is: “At what rate should we be taxing superannuation and savings more generally?”. Here’s why. Every time we change one element in the tax system, we create additional complexity. Additional complexity means additional tax planning opportunities. Other things that I can’t even imagine will happen. Small business structures with their 25 per cent tax rate might present new possibilities.
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