The government should end favourable tax concessions for super funds once balances exceed $1.8 million, according to an Australian retail super fund, Good Super.
Good Super managing director Andrew MacLeod said allowing the generous advantages in super taxation incentives to continue only benefits baby boomers and enables ‘intergenerational theft’ to continue.
Mr MacLeod said the issue of intergenerational theft by the baby boomers, impacting upon Generations X and Y, was a problem highlighted in the Intergenerational Report.
“While tax concessions for young and low income people make sense to encourage better retirement savings, it makes no sense to give tax concessions to the [ultra] wealthy when government tax revenues are as tight as today’s,” he said.
Tax concessions should therefore end after an objective retirement capital level is met, which should be set as a function of average yearly earnings and interest rates, Mr MacLeod said.
“Australia’s current average yearly earnings are just under $75,000 and term-deposit interest rates are around 4 per cent - to gain $75,000 at 4 per cent, a retiree would need $1.875 million in super,” he said.
“Good Super therefore proposes that a reasonable cut-off limit for tax concessions in super is the amount of capital required to achieve average yearly earnings on a fixed-term deposit.”
Mr MacLeod said the cut-off limit could be reset as part of the Budget process each year using the average yearly earnings rate ratio.
“Using an objective method would remove argument about what is a reasonable level for tax concessions,” he said.
According to Mr MacLeod, Australia needs to ensure that retirement can be funded by the majority of Australians without recourse to the pension system, which he said is a “safety net, not a comfort net”.
“Rather than fund tomorrow’s retirement for the wealthy, we should fund today’s infrastructure for the younger generations,” he said.
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