The latest budget shows that two superannuation tax concessions have cost the Government $36 billion this financial year. Tax free super payouts of super have been available since 2007 – this means that if you met a condition of release (like retiring or reaching 60) you would be able to receive your superannuation benefits free from tax.
Super tax breaks enable many to pay less tax on their savings than personal income tax rates require. These tax breaks can be viewed as a great way to incentivise income earners to save and supplement retirement so there is less reliance on Government pensions. Or on the other hand, these tax breaks can be framed as an unequal tax that enables the rich to pay less tax.
There is evidence that the wealthy incur great benefits from super tax breaks. According to the Financial System Inquiry led by former banker David Murray, only $1 in every $200 of the cost of super concessions goes to the bottom 20 per cent of income earners, whereas more than half goes to the top 20 per cent.
John Daley, the chief executive of the Grattan Institute, claims that ‘more than half the benefits flow to the top 20 per cent of households.’ He argues that rich households are the least vulnerable when it comes to retirement savings: ‘these households need the least encouragement to save for their retirement. In practice they save even more outside superannuation than inside. And given their wealth, they are unlikely to qualify for a part age pension.’ Daley claims that super tax breaks are not needed to encourage the wealth to save because ‘the primary reason that high-income earners save is so that they will have money to consume in retirement.’
It will be interesting to see different perspectives on Government Tax Concessions in the lead up to the next election. Changes will be hard to sell to Australia’s increasingly elderly voters who are becoming Australia’s most significant voting group and so they will be critical to shaping choices the government makes for superannuation.
For any queries regarding superannuation or wealth management, you can get in touch with the team at Fortis Accounting Partners on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
