Retirement
How much are superannuation taxes costing you in retirement?
Unnecessary superannuation taxes are leading to Australians retiring with less, costing the government more in the long run, new research has found.
How much are superannuation taxes costing you in retirement?
Unnecessary superannuation taxes are leading to Australians retiring with less, costing the government more in the long run, new research has found.
Findings released by the Australian Taxation Alliance showed that the 15 per cent tax rate on interest along with high returning superfunds and compound interest over a lifetime add up, with the average worker retiring with 25 per cent less money in their super.
Based on the current superannuation rate that is legislated to go through starting 1 July 2021, the research found that a typical worker who starts work at 25 with an income of $65,000 will retire with $28,300 instead of $37,800 per year.
According to the Association of Superannuation Funds of Australia’s Retirement Standards, a modest retirement requires $40,829 on the assumption the retiree owns their own home.
The grassroots tax advocacy group pointed out that this ‘unnecessary’ tax is costing Australians and seeing many retire with just 54 per cent of their working income.
The group also argued that the tax on contributions greatly impacts a person’s ability to retire comfortably, noting that if the tax on contributions were to be scrapped, a worker would be able to retire on 63 per cent of their working income as opposed to 54 per cent.
“Superannuation is just another tax that buys the trust of Australian taxpayers with false promises of social security and other benefits,” said ATA policy researcher Xin Yuan Quek.
The truth, Mr Quek said, is "these taxes are hurting us more than protecting us".
“The triple taxation of superannuation doesn’t serve anyone well. The federal government only collects $12.9 billion per year in super taxes and yet they have to pay out over $50 billion in the means-test age pension,” Ms Quek said.
Ms Quek noted that many Australians depend on superannuation to preserve their savings, but they are taxed on contributions, investment earnings and withdrawals. These taxes accumulate and rob Australians of a comfortable retirement.
“The superannuation scheme is merely a wolf in sheep’s clothing, robbing taxpayers of financial independence on the pretence of caring for retirees,” she concluded.
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