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Copeland seeks fairer tax deal for super funds

Media Statement For immediate release Friday, 29 August, 2003

Copeland seeks fairer tax deal for super funds

Government moves to cut the tax on employer contributions to super funds have it half right, United Future's Gordon Copeland says.

"The cuts means employer contributions will now be taxed 21% for those earning less than $38,000 and 15% for those under $9500, and that's great - but there is an anomaly that still needs fixing," Mr Copeland, United Future's revenue spokesman, said.

"So for once, let's give the benefit to the tax payer rather than the consolidated fund.

"The system proposed by the Government has a problem for those earning close to the $38,000 threshold. If the employee's earnings plus the employer's contribution to the super fund total less than $38,000 then both amounts will be taxed at 21%.

"However if a person is earning, say, $36,000 and the employer is making a contribution equal to 10% of that salary (i.e. $3,600) then since the total amounts to $39,600 - just above the $38,000 threshold - then the whole of the employer's contribution will be taxed at 33 cents.

"I would prefer to see both the earnings and the employer's contributions taxed at 21 cents. Unless this change is made the employee is being overtaxed at 12 cents in the dollar on the $2000, which remains under $38,000. The intent of the change is then negated in relation to that $2000.

"This is also more consistent with the tax position for those earning over $60,000.

"At that point, tax remains at 33 cents on the employer's contributions even although it goes up to 39 cents on the salary component of the employee's total earnings. This confers six cents in the dollar tax advantage on those earning over $60,000.

"Therefore, I think it is consistent with the overall policy intent for the new rules to tax the employer's contribution at the 21 cents rate whenever an employee's salary is below the $38,000 threshold.

Mr Copeland said he would take the matter up at the Finance and Expenditure Committee, which is currently considering the Tax Bill.


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