Div 296 must proceed to strengthen 'fairness' in superannuation: ASFA

Ahead of the federal election, the Association of Superannuation Funds of Australia (ASFA) has urged all contesting parties to consider its recommendations to "protect and strengthen" the super sector.

The peak body is calling for specific reforms in the sector, including proceeding with the controversial Division 296 Bill, which aims to double the tax on super balances exceeding the $3 million threshold.

The bill has been put on halt until at least after the election; the Coalition has reiterated the bill will be rubbished should it be elected on May 3.

Those opposing the tax have been vocal around their concerns, including taxing unrealised gains and the lack of indexation on the threshold.

This includes the independent member for Wentworth Allegra Spender who attended the Financial Advice Association of Australia's Federal Election Summit today, labelling the tax on unrealised gains a "very bad policy".

"I have worked across the parliament, with the Senate, particularly on the unrealised gains tax to make the case for how much damage it would do," Spender said.

"And so far, so good, we have been successful in stopping it, and I will do everything to keep that not going through the parliament, because I think it is really problematic."

However, ASFA believes the tax can effectively ensure fairness in super tax concessions, arguing that the incoming government should commit to maintaining the sustainability of the super system by ensuring tax concessions are "distributed fairly", which is supported by The Australia Institute.

"This includes supporting Division 296 measures while ring-fencing and enhancing the Low-Income Superannuation Tax Offset (LISTO) to protect low-income earners," the report said.

"These reforms present an opportunity to enhance fairness in the system while preserving long-term retirement savings."

In fact, speaking at a media event last week, ASFA chief executive Mary Delahunty justified the sentiment.

"ASFA believes that the tax on earnings on assets above $3 million is a worthwhile pursuit, the bill and the shape that it's currently in, obviously has some hairs on it," Delahunty said.

"I'm not as concerned about the taxation of unrealised capital gains as some other commentators are, I think we're all familiar with land tax, which is also a taxation system that is based on unrealised capital gains.

"Whether or not that means you need to pay the tax at the time, or whether there should be some reform done to that bill that would see a debt held over. Those are the sorts of issues I think an incoming government might want to tackle if they want to bring more equity to the tax incentives in superannuation."

Other recommendations include immediate attention to payday super, providing super for all workers under 18, strengthening enforcement of superannuation guarantee compliance.

The peak body also advised the government to protect super entitlement in case of insolvencies, enabling contributions to pension accounts, and banning the use of adverse genetic testing results in life insurance through the paper.

"This federal election ASFA is calling for targeted and coordinated reforms that protect and build upon the strengths of Australia's superannuation system, including maintaining the elements that make our system work: preservation settings, improving equity outcomes, and ensuring the system remains a pillar of national economic stability," Delahunty added.

"If adopted, ASFA's recommendations will enable superannuation to continue to deliver strong retirement outcomes for individuals that will allow them to retire with dignity, while also playing a critical role in funding infrastructure, housing and business investment."