A new report by the Association of Superannuation Funds of Australia (ASFA) has revealed a clear picture of where superannuation tax concessions flow and counters the assumption concessional contributions are significantly skewed towards high-income earners.
The “2014 Equity and Sustainability of Government Assistance for Retirement Income in Australia” report found tax concessions applied to superannuation contributions supported the bulk of the working community to save for retirement.
It also found the large proportion of tax concessions applied to superannuation investment earnings flowed to middle-to-high-income earners.
ASFA chief executive Pauline Vamos said the development of public policy regarding the equity and sustainability of the superannuation system must be based on sound assumptions and facts.
“This report clearly shows that when it comes to the tax concessions applied to superannuation concessional contributions, the majority flow to those in the middle income bracket who make up a large part of the Australian workforce,” Vamos said.
“This provides evidence that the contribution caps, which have been lowered substantially over the past few years, are working to reduce the concessional contributions made by upper-income earners, while continuing to provide support to the majority of Australians to help them save for their retirement.”
She said various policies, like tax concessions, could be adjusted to increase the equity of the superannuation system. “With this in mind, there are a number of ways government policy could be adjusted to make sure that people are using superannuation for retirement purposes and not as a wealth accumulation tool,” she said.
The report made a number of recommendations, including the continuation of capped concessional tax treatment of superannuation, the introduction of lifetime caps for non-concessional contributions and limiting tax concessions for very high account balances.
“This would help ensure that people are using superannuation as a means to provide enough income for a comfortable retirement and not for wealth accumulation or estate planning purposes,” Vamos said.
Raising retirement incomes, increasing national savings and reducing government spending on the age pension would achieve sustainability as the system matured, the report said.
“For Australians to experience a comfortable lifestyle in retirement, they cannot rely on the age pension alone,” Vamos said. “As the system matures and average balances increase, the community will benefit from higher incomes in retirement provided by superannuation savings.”