ACOSS welcomes today’s passage of legislation that will rein in the most excessive superannuation tax breaks for wealthy retirees but much more needs to be done to make super fair and sustainable.
“The Government’s superannuation changes that passed the Senate today are the first big step towards a fairer and sustainable super system that works for all, not just a wealthy minority,” ACOSS CEO Dr Cassandra Goldie said.
“These reforms mean that people can no longer claim tax breaks on funds of more than $1.6 million in their super accounts, or annual contributions above $25,000. By cutting annual non concessional contributions to $100,000, they also make it harder for wealthy people to use superannuation to shelter their income and assets from tax.
“The reforms curb the extremes of tax avoidance through superannuation by the top 5% or so of income earners. They save the Budget over $4 billion over the next four years and help defuse the ‘Budget time bomb’ of runaway retirement tax concessions.
“Super tax concessions, like other government expenditures and tax breaks, should be properly targeted and fit for purpose. That’s why the forthcoming legislation to define the purpose of super is important. It should be about a decent retirement income for everyone, not just a wealthy few.
“We particularly welcome the Government’s rebate on contributions for people on low income, which retains Labor’s low income super contribution in a different form. This will help people who genuinely need more public support for a decent retirement.
“Regrettably, today’s legislation also opens up some new tax avoidance opportunities for high income earners in the form of a deduction for super contributions and a higher cap for so-called ‘catch up’ contributions. These changes will cost $1 billion over the next four years and much more in future.
“Today’s changes should signal the beginning, not the end, of superannuation reform. The system remains deeply flawed, even if its worst excesses have now been trimmed back.
“High income earners will still receive five times the tax break on their employer contributions as people on the lowest income tax rate, per dollar contributed. This should be fixed, as the Henry Report proposed, by taxing contributions at each individual’s marginal tax rate, minus a rebate.
“People can still shift their income and assets into super and avoid tax completely – unlike almost any other type of investment – once their fund starts paying them a pension. Even with the $1.6 million cap on super assets in place, a retired couple can still receive a tax-free annual income of up to $138,000. Super fund earnings such as interest and dividends ought to be taxed at 15%, not zero.
“Special tax breaks based entirely on age should be replaced with rebates limited to people receiving a government pension or allowance. This would save $850 million a year according to the Grattan Institute.
“The Government foregoes $30 billion each year in revenue due to super tax breaks.
“The changes passed today curb the excesses of these tax breaks for the top 5%, but we need to do much more to ensure that superannuation is both fair and sustainable.”
CONTACT: Alan Walmsley, ACOSS Media, 0419 626 155