The Australian Council of Social Service today said the Federal Government cannot afford to keep giving the top 20% of income earners half of all superannuation tax concessions if it wants the superannuation system to be effective in helping the majority of people to have a decent standard of living in later life, and have the revenue to pay for vital services for an ageing population.
“Right now, the superannuation system has become one of the most favoured tax minimisation vehicles for high net worth individuals, whilst it fails to deliver decent savings for the great majority. To reduce poverty and future pressures on the age pension, we need to target super tax concessions so that they help saving by people on low to middle incomes, not wealthy people who will have no trouble securing their retirement future,” said ACOSS CEO Dr Cassandra Goldie.
“Chair of the Financial Services inquiry David Murray is right to question whether superannuation is doing the job it is supposed to do. Our superannuation tax concessions are inefficient, inequitable and wasteful. As Mr Murray points out, those on higher incomes would save for their retirement without such generous incentives.
“When the top 10% of male tax payers receive more from super tax concessions over their lifetime than they would if they received the full rate of the age pension in retirement, we have a system that is not achieving its aims of ensuring adequate retirement incomes and taking the pressure off the age pension.
“We can no longer afford to allow the majority of super funds to pay no tax at all of their investment incomes, when any other investment would be taxed. The Government should shut down tax schemes which allow people over 55 years to churn their wages through their superannuation accounts, reducing their income tax rates to 15%, at most.
“Decent reform of superannuation tax concessions is long overdue. With broad consensus that Australia faces a budget challenge in the medium term, now is the right time to grapple with the deep inequities in who gets tax relief through superannuation.
“The fact is there are alternatives to the current Budget proposals on the table which overwhelmingly hurt people on the lowest incomes. Instead of cutting future age pensions for those with the least, and penalising low income people on their super contributions, the Government should reduce super tax breaks for those with the most.
“It is unbelievable that the Government wants to abolish the Low Income Superannuation Contribution which would have supported retirement saving by people on lower incomes, when such generous tax concessions are going to top income earners.
“The reality is that we will need to pay for services for an ageing population. Retired people on the lowest incomes cannot afford to pay for doctor’s visits or aged care. Nor can they afford to have the real value of their pensions frozen, or to live on the $36 a day Newstart Allowance until they reach the age of 70. These budget proposals shift the burden to those least able to pay.
“In the short term ACOSS proposes that the $25,000 annual cap on super contributions attracting tax breaks be restored and that super fund earnings in the ‘pension phase’ be taxed at 15%, the same as fund earnings in the contributions phase.
“Over time, the system of tax breaks for contributions should be restructured, so that all contributions are taxed at the individual’s marginal tax rate, minus a rebate. The high income earners would get the same tax break per dollar invested as low income earners, no more and no less.
“It is important that we look at how to fund quality aged and health care in an equitable way, by identifying areas of inefficiencies where those already on high incomes are being subsidised to do what they would do anyway,” Dr Goldie said.
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