While we broadly support the foreign superannuation tax changes we have a number of concerns, including:
- Potential for over taxation: this is due to the 5% return rate assumption implicit in the new rules (whereas the current rules, to the extent they apply, tax the lesser of 5% and the actual return each year, with no tax payable if a loss is made); a person’s marginal tax rate increasing in the year in which they withdraw their foreign superannuation savings (i.e. “tax bracket creep”), and the continued full taxation of foreign pensions and annuities.
- Scope of the proposed amnesty: we do not believe the proposed amnesty will be effective in dealing with the widespread current non-compliance, as it will only apply to a narrow subset of foreign superannuation schemes. The amnesty needs to be applied much more widely to have relevance.