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.”
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In the case of a high wealth or high income earning individual the tax saving on a $35,000 superannuation contribution (the saving is around $10,000) is not going be the game breaker when they consider their investment choices.
No wonder wealthy people are driven to move their wealth offshore or hide it! How silly can you get? One can’t self-righteously denounce “tax avoidance” (which means legal avoidance as opposed to illegal evasion)without assuming people are responding to tax incentives or disincentives.
Of course removing tax concessions won’t change behaviour around savings when the government forces you to save.
Removing tax incentives will probably encourage people who are contributing extra into super to save outside super instead, since there would be no benefit to making extra contributions but a massive disincentive because you lose control of your money till preservation.
I like how they make the statement and say it’s based on evidence but don’t show us the evidence. As a SMSF practitioner I have to say that the tax concessions for deductible super contributions are about right however it the non concessional deductions that are the problem and I suspect the current Government are onto to this with changes which suggest there will be a lifetime amount rather than the $180,000 pa for non deductible contributions.
The reason the Gratton Institute is a left wing fairyland operation is because they live in an ethereal world. The reason people do not put more into superannuation is because they cannot with the caps that apply.
There is no evidence to support any of their contentions just socialist take from the rich and give to the poor stuff.
They are in another realm of fantasy really.
HNW clients simply don’t need superannuation because as has been seen in the press lately,they will find ways to pay very little tax anyway, so I agree with Grattan’s findings, SMFS’s are just a little more convenient and that is all. I would propose that any HNW person earning in excess of $1mil be banned for using super. As a society we have totally missed the mark, it is the middle and lower income earners that need assistance