Peter Costello says taxing super too hard for little return

Peter Costello: "an enormous impost for very little return."
Peter Costello: “an enormous impost for very little return.” Stefan Postles

Future Fund chairman and former federal treasurer Peter Costello warned that taxing superannuation payouts will be more complicated than critics of his reforms during the Howard government admit.

by Ben Potter  3 Sept 2015  AFR

Peter Costello  says dumping the tax exemption for superannuation payouts, which critics say is too generous, will be enormously complicated and generate little revenue.

The former federal treasurer abolished the tax on superannuation payouts for over-60s in his 2006 budget, and strongly defended the changes as a “massive simplification” of an overly complex system that had taxed super at three levels.

Many tax experts in think tanks, accounting firms and big business, argue the system is too generous to high income earners and their concessions, worth billions of dollars annually, and should be wound back.

The National Reform Summit last week agreed that super tax breaks were too generous and should be reviewed as part of the wider tax reform process.

Speaking after the $117 billion Future Fund revealed a 15.4 per cent return, Mr Costello, who is the fund’s chairman, said there was no need for an inquiry into the superannuation system.

He said he learned from past experience that the taxation of super earnings raised little revenue in practice because of the complexity.

THREE TAXATION TIERS

“Up until then we were taxing contributions, earnings and payouts. There were three tiers of taxation and the third tier … was an extremely complicated tier with RBLs [reasonable benefit limits] and quarantining of taxed money and untaxed money and it was honoured more in the breach than in the observance I can tell you that,” he said.

 Mr Costello said advocates for restoring the tax on super payouts ignored the difficulties.

“There are those who say we should go back to that third tier of taxation again,” he said.

“I’ll make this prediction. It’s much more complicated than a lot of those people are saying when you actually sit down and have a look at doing it, it’s an enormous impost for very little return.”

Mr Costello said the Abbott government had come to the same conclusion when it considered the former Labor government’s un-enacted plan to restore the super payout tax.

Original article here

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