Former treasurer Costello backs super concessions
As calls for superannuation tax reform intensify, former treasurer Peter Costello has come out in defence of the tax concessions granted to superannuation investors.
Speaking at the Association of Superannuation Funds of Australia conference in Melbourne yesterday, Mr Costello acknowledged superannuation investors enjoy generous tax concessions.
“Superannuation funds are vehicles for long-term savings and as such they enjoy tax advantages. Where an employer pays contributions into a superannuation fund rather than direct to the employee it is taxed at 15 per cent rather than the marginal income tax rate,” Mr Costello said.
“The treasury estimates that the value on this tax concession, that is the difference between 15 per cent contribution rate and the marginal tax rate is around $16 billion.
“In addition, the earnings of a superannuation fund are concessionally taxed: they are not taxed at the marginal income tax rate of the person who earns the money, they are taxed at 15 per cent. The treasury estimates this concession to also be around $16 billion to the industry.”
These concessions are justified on the basis that they are assisting taxpayers in saving for their retirement, with the ultimate aim of taking pressure off the aged pension.
“It is not such a bad deal for the government. Any assessment of the true cost of these concessions must take into account the savings on the aged pension that will be delivered back to the government as a result of private superannuation,” he said.
Mr Costello also played down the benefits of having the superannuation guarantee at 12 per cent.
He noted the Commission of Audit reported that in 2050, even assuming a 12 per cent SG rate, 80 per cent of Australians will still be on full or part pensions.
“The number of people [who] will be taken off the pension altogether, by 12 per cent super contribution, will be very small,” he said.
See today's Q&A for more on the national tax reform debate.