A range of suggested superannuation tax measures, including balance caps, lower concessional contributions and a progressive tax scale on contributions, would do little to help repair the federal budget deficit, according to the Financial Services Council (FSC).
Drawing together three measures that would alter taxes on super and three measures that would increase equity, the FSC commissioned DeltaPearl Partners to perform economic modelling as to their impact on the budget.
“With government debt approaching a trillion dollars by 2022/23, and revenue under pressure due to an uncertain global economic outlook, new economic modelling by DeltaPearl Partners shows that a package of commonly proposed taxes on superannuation would add just 1.4 per cent to total budget revenue,” the FSC stated.
As part of its analysis, DeltaPearl examined a reduction in concessional contributions from $27,500 to $15,000 and a reduction in the Division 293 tax threshold from $250,000 to $200,000.
According to the analysis released by the FSC, the first change would only raise $1.94 billion, but could reduce retirement savings by up to 36 per cent for impacted individuals, while the second change would only generate $620 million.
The analysis also modelled the outcome of the introduction of a $5 million limit on total superannuation balances, finding it would raise around $1.15 billion a year, while the introduction of a flat tax on all earnings in retirement at 15 per cent would raise about $4.82 billion a year in tax revenue, which is less than 1 per cent of total budget revenue.
The three equity measures – progressive tax settings on superannuation contributions, the inclusion of super contributions within the government paid parental leave scheme and broadening the coverage of the superannuation guarantee to platform-based gig workers – would collectively raise $3 billion.
FSC chief executive Blake Briggs said: “Over the medium term, government payments are expected to level out at 26.4 per cent of GDP (gross domestic product), significantly higher than the 24.8 per cent of GDP prior to the pandemic, requiring a focus on structural reform and economic growth to achieve budget sustainability.
“Piecemeal superannuation taxes would raise only $8.5 billion in the context of a government that collects over $560 billion annually in revenue.
“These tax changes would have a negative impact on more than 15 million Australians who are saving for their retirement through superannuation by undermining consumer confidence in the objective of the system.
“Government should not lose focus on improving equity in the system, such as paying superannuation contributions on the government paid parental leave and broadening the coverage of the superannuation guarantee to gig workers.”