Super industry warns on cutting concessions
TAX breaks for superannuation are in jeopardy, as the government considers cutting lucrative concessions for higher-income earners to help return the budget to surplus.
TAX breaks for superannuation are in jeopardy, as the government considers cutting lucrative concessions for higher-income earners to help return the budget to surplus.Super industry groups yesterday warned the government against reducing concessions for super contributions, which are forecast to cost the budget $30 billion this financial year, after it was reported they were on the chopping block.Tax breaks for super are among the most expensive tax concessions, alongside negative gearing and the exemption of owner-occupied housing from capital gains tax.The concessions allow high-income earners to pay 15 per cent tax on super contributions, rather than the top marginal rate of 45 per cent.Critics say the concessions disproportionately favour high-income earners and do little to boost national savings. But the superannuation lobby yesterday argued the concessions helped ease the pressure on future budgets by encouraging people to save for their retirement. In a rare moment of agreement between the rival parts of the super industry, both the retail funds owned by the big banks and the union-associated not-for-profit funds slammed the possible cuts.The chief executive of the Association of Superannuation Funds of Australia, Pauline Vamos, said the cuts would leave more older people reliant on the pension in years to come."Removing incentives to save more through superannuation will have a snowball effect which will mean reduced voluntary contributions, less money invested in the Australian economy through the diverse holdings of the super pool and a much bigger burden on the taxpayer down the track," Ms Vamos said.Super groups have welcomed the government's policy of increasing employers' compulsory contributions from 9 per cent to 12 per cent of wages over the next seven years, but they said this could be undone by the proposed cuts.The chief executive of the Financial Services Council, John Brogden, claimed cutting the concessions was against the interests of people with savings and would hurt future budgets. "Any savings for the budget through reducing concessions in superannuation would be far outweighed by costs borne in future budgets," he said.In contrast, the Organisation for Economic Co-operation and Development this month recommended member countries' governments look at preferential tax treatment of retirement savings as a way to get their budgets in shape. There was "scant evidence" that tax perks increased the overall levels of saving, an OECD report said.