Speaking to 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 that some “hard decisions” lie ahead for the government 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,” Mr Morrison said.
“However, what is less clear is where the concessions for high-income earners increase savings behaviour or relieve pressure on the age pension.”
I am 34, earn around $200k pa and go without now to ensure I salary sacrifice pretty much up to the caps. Yes I get a huge tax saving on this, but I also suffer massive SACRIFICE by foregoing that income now and doing things much tougher as result (we choose for my wife to be a stay home mum with out 4 year old).
If my salary sacrifice concessions are decreased I will cease using super and just save my SG and start building wealth outside of super. I understand importance of super, but since it will be around 30 years before I can touch it, I’m not willing to go that much without now unless the tax incentives are as big as they currently are.
Also, kind of think its BS that a couple both earning half what I am would likely not be ‘high income earners’ and still get all the welfare, tax concessions, etc, but even though my and wifes combined income is the same (just 100% weighted to me) we get nil welfare, nil childcare rebate, I will suffer high earner penalties, cop flood levy, budget repair levy, etc.
Kind of makes me wanna try less hard and work less and earn less and thus pay less overall tax.
Paul, you are completely correct…
Unfortunately, like most legislation, they will only consider the ‘pros’ being the increased tax revenue without actually modeling the increased future pension expense as people neglect saving for retirement.
Even with superannuation’s extremely tax advantageous environment many people do not ‘believe in super’ so save nothing… This isn’t going to help!
Unfortunately the long held fear that incompetent short sighted politicians would not be able to resist trying to access superannuation savings is likely to become a reality.
If Scott Morrison can not work out that self funded retirees relieve pressure on the age pension he and his government are morons.
In return for locking their savings up for 30 to 40 years they receive a tax deduction. Remove the deduction and savings will go elsewhere with improved liquidity and in many cases it will not be to the benefit of Australia.
Here is a clue Scott, reduce middle class welfare and broaden the GST tax base. Decrease the public sector and bureaucratic cost of running small business and then Australia can grow.
Australia’s fully funded superannuation system is the envy of the world – it isn’t yours so stay the hell away from it!