Super tax concessions are in the Albanese government’s line of sight as it looks for opportunities to boost revenue and repair the budget bottom line.
Assistant Treasurer Stephen Jones said tax concessions on super funds are costly to government finances and are being used to amass wealth.
“If the objective of super is to provide a tax-preferred means for estate planning, you could say it is doing its job,” Mr Jones told the Australian Financial Review’s wealth and super summit.
Concessional taxation of super was introduced to encourage more people to save super rather than rely on the pension.
Under the rules, anybody can pay money into their super fund and it is taxed at 15 per cent, which is much less than the 45 per cent marginal rate high-income earners pay.
Mr Jones said there were 32 self-managed super funds with more than $100 million in assets.
“I celebrate success, but the concessional taxation of funds like these has a real cost to the budget which needs to considered.”
Grattan Institute research has found the tax benefits of super tax concession are poorly targeted, with around 50 per cent of the tax benefits flowing to the wealthiest 20 per cent of households.
To make the system fairer, some groups have been arguing for a limit – say $5 million – on how much people can save within the super system.
“The argument goes that you would simply pay income tax at normal rates rather than 15 per cent,” H&R Block tax expert Mark Chapman explained.
On the other hand, he said the constant tinkering with superannuation was unfair.
“People have been paying into their super for decades under one set of rules, and it’s reasonable to assume those rules will still apply when you get to super age,” he said.
But with government debt expected to grow, Mr Chapman said a $5 million super cap was reasonable to help repair the budget.
Before embarking on reforms to super tax reforms, Mr Jones said he wanted to consult on a common, agreed objective for super.
“With an objective that is settled, we can talk sensibly about tax,” he said.
Opposition financial services spokesman Stuart Robert said Australians deserved certainty when it came to superannuation.
“Labor went to the election promising to not touch superannuation, yet since the election all we have seen is how Labor wants to change super, including increasing taxes and reducing transparency on super expenditure,” he told AAP.
The government was seeking to fill a budget black hole with more taxes, he said.
“If Labor progresses further than this tax increase kite-flying policy idea, it would be a major broken promise.”
Poppy Johnston
(Australian Associated Press)
