The lobby group for industry superannuation funds, Industry Super Australia (ISA), has admitted that the superannuation concessions structure is grossly unfair and needs a radical overhaul:
ISA said a person earning more than $124,000 a year – putting them in the top 10% of taxpayers – gets an average tax advantage on their contributions to super of $3,677 a year, 75 times the $49 a year reaped by someone on $22,000…
“It is clear that the equity and efficiency of government supports, including tax concessions, need to be considered to ensure the supports are being appropriately targeted at those that need it the most – not the least,” ISA chief executive Bernie Dean said.
“Entrenched inequities must be examined as part of the retirement income review, otherwise we will continue to see women retire with about half the amount of super than men, and low-income earners retire with persistently low super balances”…
The inequity of Australia’s superannuation concession structure is illustrated in the below table, which shows the percentage amount of concession received by taxable income:
Because a flat 15% tax is levied on superannuation contributions and earnings, those with the highest marginal tax rates generally receive the highest tax concessions.
Indeed, the Australian Treasury recently showed that those Australians fortunate enough to be in the top 1% of income earners will receive over $700,000 in taxpayer contributions to their personal superannuation account over their working lives, whereas those in the bottom 10% of income earners will receive less than $50,000:
Surely these gross inequities undermine ISA’s forceful push for the superannuation guarantee (compulsory superannuation) to be raised from its current level of 9.5% to 12%?
Superannuation concessions already cost the federal government and obscene $43 billion a year, most of which flows to high income earners. Therefore, lifting the superannuation guarantee to 12% will only worsen the current inequities, blow an even bigger hole in the federal budget, and reduce lower-income workers’ disposable income.
In fact, the only winner from lifting the superannuation guarantee to 12% will be fund managers like ISA, which will ‘clip-the-ticket’ on more funds under management.
