Tax concessions have 'little impact' on behaviour, says Grattan Institute
The Grattan Institute has rejected the argument that abolishing superannuation tax breaks would significantly affect retirement savings, claiming that individuals who claim concessions would save the same amount regardless.
Speaking to SMSF Adviser, Grattan Institute chief executive John Daley said there is consistent evidence both in Australia and internationally that high-income earners would save the same amount of money for retirement regardless of the tax incentives they are given.
"You can see that even in Australia people tend to save quite a lot outside superannuation even though it’s much less tax efficient," said Mr Daley.
"The reason that high-income earners in particular save the same amount is that if you’re earning $150,000 a year as a household at the moment, then you’re not planning to live on the age pension at $30,000 a year."
While tax concessions for superannuation do increase balances marginally, he said, the extra amount in the fund is only the result of the tax they didn’t have to pay.
"Obviously the net amount they save is a bit larger because if I save $100, the super tax concessions on that mean the amount I have in the fund will be slightly higher than it would be otherwise, but the amount I’ve consumed and put away has not changed," he explained.
This marginal increase in fund balances, he said, is the main reason a lot of the industry groups are in favour or tax concessions as slightly higher super balances generally means they are able to collect higher fees.
"But if you look at the international evidence it’s pretty clear that tax incentives have very little impact on savings behaviour," he said.
"Now I can understand why [the industry] makes these claims, it’s just there’s no evidence."
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.