CPA Australia warns super tax changes risk eroding retirement savings

CPA Australia has cautioned that projected changes to superannuation taxation rules could “unfairly” erode Australians’ status savings by mismanaging the attraction of franking credits.

In a submission connected the vulnerability draught of the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Bill 2025, the nonrecreational assemblage argued that the draught provisions neglect to bespeak the halfway relation of franking credits successful the taxation strategy and hazard distorting however superannuation funds invest.

The submission was prepared jointly with Chartered Accountants Australia and New Zealand and the Institute of Public Accountants.

Richard Webb, CPA Australia’s superannuation lead, said the draught attack would make uneven outcomes for funds, peculiarly wherever franking credits are omitted from the calculation of money net for Division 296.

“Franking credits beryllium to guarantee income is taxed astatine the shareholder’s close taxation rate. Ignoring them successful the caller ace taxation model produces an unfair and inconsistent result,” Webb said.

“For galore ace funds, franking credits are efficaciously a refund of taxation already paid. Treating those refunds arsenic irrelevant erstwhile calculating net is astatine likelihood with however our taxation strategy is designed to work.”

According to the submission, the draught instrumentality would disadvantage superannuation funds that clasp investments producing franked dividends, adjacent successful cases wherever concessional taxation settings mean those dividends yet look small oregon nary tax.

“In practice, the connection could effect successful identical concern returns being taxed differently, simply due to the fact that 1 includes franking credits and the different does not,” Webb said.

“This creates artificial incentives that could propulsion trustees distant from Australian equities, perchance harming some status outcomes and superior markets much broadly.”

CPA Australia’s submission argues that franking credits and comparable taxation offsets should beryllium included successful a fund’s nett income to bespeak their existent economical benefit, alternatively of being near retired of the net calculation nether the projected Division 296 rules.

The papers sets retired a elaborate illustration showing however the existent drafting tin pb to higher calculated “earnings” for franked dividends than for unfranked dividends, adjacent erstwhile the currency dividend magnitude is identical.

“This isn’t astir gaining an advantage,” Webb said. “It is astir just and accordant taxation that reflects existent income, avoids unintended consequences and maintains assurance successful Australia’s status income system.”

CPA Australia has called connected the authorities to revise the authorities truthful that franking credits and akin offsets are appropriately recognised successful determining superannuation money earnings.