The government's options for increasing taxes on superannuation are shrinking. The industry has warned that one of the options - a higher tax on funds held by high earners - would be almost impossible to administer.
"The funds would have to attribute to individual tax file numbers earnings on every product they sell," one source said. "It would be an administrative nightmare. Right now funds can apply the same tax rate across the entire pool. It could probably be forced through, but it would have unintended consequences."
The industry could more easily live with a higher tax rate on all fund earnings.
The government had been considering boosting the tax on the super fund earnings of high earners from 15 to 30 per cent. The change would net it between $500 million and $1 billion a year.
An alternative proposal - boosting the earnings tax on all super accounts from 15 to 20 per cent - might raise $4 billion a year, and much more over time as fund balances climb.
The calculation is based on the long-term super fund return of 6 per cent per year. But fund earnings are uneven. Many will report losses when they next pay tax, meaning the higher tax rate on earnings would cost the government money because it would be offset at a greater rate against the tax on super contributions.
Treasurer Wayne Swan is understood to be reluctant to increase super taxes across the board, and is continuing to look for ways that cut concessions for the high earners.
Treasury calculations show that in 2009-10 the top 1 per cent of earners received an average super tax concession of $19,200. Middle earners got $800. Mr Swan began attacking concessions for high earners in last year's budget, taxing the contributions of Australians earning more than $300,000 at 30 per cent rather than 15 per cent.