Federal Treasurer Scott Morrison said it is clear the government will need to make some difficult choices 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. However, what is less clear is where the concessions for high-income earners increase savings behaviour or relieve pressure on the age pension,” Mr Morrison said.
Since this address, speculation is mounting that senior cabinet ministers are encouraging Mr Morrison to consider a proposal in a pre-budget submission urging the government to allow low-income workers the option of opting out of compulsory super.
This has been met with widespread opposition, including from representative body The SMSF Association (SMSFA).
SMSFA chief executive Andrea Slattery also believes the policy proposal will have long-term negative consequences.
Ms Slattery said the notion that small amounts of income have a negligible impact on a person’s long-term retirement savings outcome simply reveals a lack of understanding about how compounding works.
“The other downside of being outside the superannuation system is not having access to insurance. In the event of the untimely death of a young person or a serious work injury, these payments can be critical,” said Ms Slattery.