The Labor government’s policy proposal to look at a change in the superannuation tax concessions currently on offer has received support from an economic consultant on the basis that the current framework requires more equitable settings.
Speaking on a panel at the AFR Super & Wealth Summit 2022 held in Sydney yesterday, Commonwealth Treasury Retirement Incomes Review chair Mike Callaghan told delegates the tax concessions need revision as they represent a form of misdirected government support.
“We should have some objectives for the system and one of those objectives is equity. It is very important. How do you define equity? One definition would be [that] government assistance should be targeted to those who need it and another definition of equity is people in similar circumstances should have similar outcomes,” Callaghan noted.
He cited the age pension as an area of the retirement system that reflects these equity goals.
“[There] government assistance is targeted at those who need it – people who actually need the [age] pension to get a minimum level of retirement income or to supplement those people who have other resources to get a more adequate retirement income,” he noted.
However, he pointed out the superannuation tax concessions could not be viewed in the same manner.
“Is the government assistance there targeted to those that need it most? That’s where it really doesn’t stack up. If you have a look, the overwhelming benefit of it goes to high-income earners. Do they need it?” he said.
According to Callaghan, it is an area requiring discussion and he implored people to give it due consideration rather than immediately dismissing the proposal.
With regard to where amendments to the way superannuation is taxed might occur, fellow panellist Deloitte Australia partner Andrew Boal identified one particular area that stands out.
“Investment income tax concessions currently [make up] 1 per cent of GPD (gross domestic product) [and that] is going to rise to 1.9 per cent of GDP [according to the latest Intergenerational Report]. So while it’s a bit of a problem now, the problem is going to double and it’s because of the rising superannuation balances mostly for the wealthy,” Boal said.
“So that’s the obvious place to target.”