22 November 2011
The Australian Council of Social Service today repeated its call for the Australian Government to address the inequities in the tax concessions on super contributions, with an annual capped rebate as recommended by the Henry Tax Review.
“We are concerned that the benefits of the proposed increase in the superannuation guarantee from 9-12 % will not be fairly shared,” said ACOSS CEO Dr Cassandra Goldie.
“If this increase is to occur, we must ensure that low and middle income earners are guaranteed an equitable share of the estimated $500 billion boost to super savings by 2035 from this reform.
“Presently tax breaks for superannuation contributions mainly benefit those in the top two tax brackets because employer contributions are taxed at the flat tax rate of 15% regardless of how much you earn.
“Compared with the marginal tax rate an employee pays on their wages, this means that high income earners receive a tax saving of over 30 cents per dollar contributed by their employer. Middle income earners save 15-20 cents per dollar. But low income earners below the tax free threshold (currently $16,000 taking account of the Low Income Tax Offset) are hit with a tax penalty of 15 cents per dollar contributed. This is because super contributions are taxed at 15% compared with the zero tax rate on their wages.
“The Government’s proposed super contribution for low income earners at least removes this tax penalty from their superannuation. But even if the Government super contribution is introduced, the tax break for the employer contributions for low income earners will be zero, compared with a tax saving of over 30% for a high income earner.
“ACOSS estimates that of the $15 billion in tax breaks on superannuation contributions in 2008, almost 20% went to the top 2% of income earners (those over $150,000) and almost 50% went to the top 12%.
“This is wasteful as well as unfair since higher income earners are likely to save for retirement without tax breaks, and are unlikely to rely on the age pension in any event.
“The time to fix the glaring inequities in superannuation is now – if compulsory superannuation is to be boosted from 9-12%, this should be built on a fair and sustainable foundation.
“ACOSS supports the introduction of a Minerals Resource Rent Tax as a way to strengthen public revenue to meet future economic development and social needs.
“However, there is no need to use the proceeds from the mining tax to boost tax breaks for those who can afford to contribute more than $25,000 in a single year, as the Government proposes. This would worsen the inequities in the system.
“Replacing the unfair, convoluted and opaque system of tax breaks for super contributions is the best way to ensure everyone benefits from the proposed lift in superannuation from 9 to 12%, and secure the savings we will all need for a dignified retirement,” Dr Goldie said.
Media Contact: Fernando de Freitas – 0419 626 155
ACOSS Submission Paper: A fairer, more efficient tax and social security system