Addressing delegates at the SMSF Association’s national conference in Adelaide, Mr Morrison said the government will soon finalise its views on tax arrangements in super.
He said it is clear the government will need to make some difficult choices when addressing the targeting of tax concessions.
“The task is to weigh up the value of superannuation’s tax concessions against other uses for how that revenue might be applied. For instance, should we direct tax concessions to superannuation in the same way that we’re doing it now or should we instead put more money towards reducing income tax or company tax?” Mr Morrison said.
“[Another] major issue that is being flagged is the distribution of concessions across different income groups. When you look at the average balances by taxable income and age, you can clearly see how a large proportion of concessions can flow to high-income earners. This is a fact.
“A substantial proportion of the superannuation tax concessions by value do go to the highest income earners. This applies in relation to both contributions and earnings concessions. And we know from the Murray Review that very little of what the government puts towards super concessions goes to the bottom 20 per cent of earners.”
Mr Morrison reiterated that the government is contemplating whether the current tax concessions for super do in fact relieve pressure on the age pension.
“It’s great that people are saving for their own retirement. They do it in super and many other forms. But I believe they raise questions about the purpose of the concessions… certainly they boost retirement incomes to the extent that their absence would result in lower balances, arguably. However, what is less clear is where the concessions for high-income earners increase savings behaviour or relieve pressure on the age pension,” Mr Morrison said.
If the government is going to remove tax concessions then they should also make super voluntary. The fact it is concessionally taxed is the ONLY reason compulsory super is palatable for me.
It’s a bit rich for the government to force people to invest in a product that they might not necessarily want to invest in (we’d be way better off using the money to pay off our mortgage) and then to heaily tax it.
If you want to relieve pressure on age pensions, require benefits to be paid as life annuities, term certain annuities based on life expectancy at time started or pensions. In the US the Treasury sets mandated withdrawal rates for account based pensions similarly as here. Then apply a $1 for $1 income test against any welfare entitlement. If they had done that back in the 80s they would not be in the mess they are in now.