Ever since it became likely that the government would increase the taxes on the superannuation of the better-off, most of the superannuation industry has been up in arms. But why should taxpayers provide tax incentives to those who have already saved enough to ensure a comfortable retirement?
The better-off are hugely advantaged courtesy of the tax deductions that are paid for by all taxpayers. They naturally make much more use of the super tax concessions than other taxpayers because they can afford to salary sacrifice more into super and to put more of their after-tax income towards their retirement.
A home-owning couple with $800,000 between them in super may not be that rich, but they have enough to afford a comfortable retirement.
The Australian Securities and Investments Commission's retirement calculator shows a home-owning couple with $400,000 each, or $800,000 combined, would have a combined income in retirement at age 65 of $57,000 a year until age 90.
After age 90, they would be on the full age pension of $30,000 a year. The most recent figures released for the ASFA Retirement Standard show that a minimum of $57,000 is needed to provide for a "comfortable" retirement for a home-owning couple intending to retire at age 65.
Some claw-back has already occurred with the lowering of the cap or limit on how much could be salary sacrificed. In 2007, it was $100,000 a year for over 50s, but has been progressively lowered and is now $25,000 for everybody. It's true that the $25,000 cap on salary sacrifice is less generous than it appears, because it includes the 9 per cent compulsory super.
Even so, all but the highest-income earners are unlikely to come up to the limit. And it should not be forgotten that those under age 65 (or older if they meet the work test) can put up to $150,000 of their after-tax pay into super averaged over a three-year period. And once inside super, earnings are taxed at only 15 per cent in the accumulation stage with no tax on earnings in the pension phase.