The Investment Savings and Insurance Association (ISI) has publicly expressed strong reservations about the Government's tax credit system that is currently before Parliament.
ISI chief executive Roger Gill says the industry could only offer qualified support for the proposal because of its complexity limited application and administrative costs.
The ISI's preferred option is for a reduced proxy rate, which would be much simpler to implement and administer.
The tax credit scheme is designed to make sure investments held by low and middle income earners in super and life schemes are taxed at the appropriate marginal tax rate.
Currently these funds all pay tax at 33 per cent, yet low and middle income earners are on rates up to 12 per cent lower.
Gill says there are an estimated 600,000 low and middle income earners who are potentially eligible to benefit from this regime but the complexities inherent in the regime meant that fewer than half of those potentially able to benefit would actually be in a position to do so.
"The Government's preference for the tax credit approach has excluded more than half the number of low and middle-income savers from the tax relief which the whole exercise was intended to provide."
He also says the additional layer of complexity imposed on the industry by this scheme is in sharp contrast with Government statements about reducing the complexity and compliance costs of taxation.
Industry estimates are that the set up cost would be around $180 million and the annual running cost of the scheme would be $60 million.
The bill relating to the tax credit scheme is currently being heard before the Finance and Expenditure select committee.
For earlier stories;
Tax credits don't add up click here
Tax credit system plagued by deficiencies click here
The Investment Savings and Insurance Association (ISI) has publicly expressed strong reservations about the Government's tax credit system that is currently before Parliament.