AUSTRALIA - Assistant treasurer Mal Brough has slated Labor's plan to phase out contributions tax for certain people, saying it would merely increase cost and result in "massive complexity".
The new plan would see people earning between A$40 000 and $100 000 exempt from the tax, but Brough claimed it would result in a massive administrative burden on funds and the Australian Taxation Office.
“A fund would have to seek the income details of every member to determine their tax rate,” said Brough. “It will be extraordinarily complex and costly for funds to operate in Labor’s super system and those costs would be paid for by members.”
Brough also alleged there was “nothing in Labor’s plan for low income workers”.
Someone who earned $100 000 a year and contributed $50 000 into their superannuation would get a $7500 tax break under Labor’s plan, said Brough. But an employee on $35,000 would pay $472.50 tax on their superannuation guarantee contribution.
“Given that Labor went to the last election with a policy to re-introduce the superannuation surcharge and to abolish the superannuation co-contribution for low income earners, people are entitled to assume that is how they will fund this latest policy,” he said.
The Howard government expects to provide concessions to superannuation of $15.9 billion in 2005-06, making superannuation the largest government tax expenditure.
That figure does not include approximately $1bn in government co-contributions which will also be paid in 2005/06.
This week's edition of Professional Pensions is out now.
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