Smith has been in sensational form with the bat following his return to international cricket after serving a one-year ban for his role in the Sandpaper Gate fiasco.
The 30-year-old had an incredible Ashes series in England as he amassed 774 runs at a staggering average of 110.57 in the seven innings he played. In the process, he also surpassed India captain Virat Kohli as the top ranked batsman in the ICC Test Rankings in the process.
"It's the million-dollar question: when Steve Smith's ban is up will he go straight back into the captaincy or will he not?" Ponting told 7NEWS.
"To be honest I think it's up to Tim how long he plays. He's the best keeper in the world. Whether that's as captain or not that's up to the hierarchy at Cricket Australia to make that decision. I've been on record already when Tim's time is up I'd like to see Steve Smith have another go.
"I think he probably feels like there's unfinished business there as far as his captaincy's concerned. He's got to want to do it and obviously then the authorities have to say yes or no," he added.
Paine has often been criticised for his poor form with the bat and questions have been raised about his position in the team. Recently, the 35-year-old, however, scored a Sheffield Shield century after 13 years.
"You've got to look at who's the best man for the job as far as the captaincy's concerned," said Ponting who felt that Smith is the best candidate to lead Australia once Paine hangs his boots.
"If it's not Tim and it's not Steve, I'm not sure who the next one is right now. I think that's the big question that needs to be answered.
"(Smith) loves the responsibility, there's no doubt about that," he added.
The former Australian skipper also exuded confidence that Smith's batting performance will not be hindered if he asked to lead the side again.
"If he's captain again I don't think it'll hinder his batting at all. If it's the right thing for the team to have him captain we'll win more games as a result of that."
Recently, Australia head coach Justin Langer had stated that Smith's total commitment to his batting could decide his future in leadership.
( With inputs from IANS )
