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Criticisms of Superannuation Tax Rates Unfounded, ASFA Says

Posted: 15 Feb 2012

The tax treatment of superannuation is considerably fairer than recent public debate would suggest, according to research by the Association of Superannuation Funds of Australia (ASFA).

According to the report, middle-income earners reap the greatest benefit from tax concessions on superannuation. ASFA’s research suggests that many figures and statistics being used in the current debate on equity in the super system are wrong or outdated, and that the proposed increase in the superannuation guarantee from 9% to 12% of gross salary makes the application tax concessions “even more equitable.”

"A commonly quoted statistic in public debate, about Australia's top 5% of income earners receiving 37% of total superannuation contributions, relates to 2005-06 when much higher contribution caps applied," says Pauline Vamos, ASFA chief executive. "Since then, tighter contribution caps on the amount of super contributions attracting the concessional tax rate and other factors have seen this drop to less than 20%. In 2009-10, around 90% of employer contributions related to individuals on less than the top marginal tax rate, with over 50% of contributions relating to individuals on a marginal income tax rate of 30% or less.”

While the ASFA research suggests that tax concessions for superannuation are equitable, ASFA does acknowledge that gaps in coverage, particularly for the self-employed, reduce universality and increase inequity. Vamos also says that low contribution caps applied early in the maturity of the superannuation system leads to inequalities for individuals with variable work patterns, such as women.

“Other reforms including Stronger Super and the Future of Financial Advice are already in train to deliver improvements to the system,” Vamos says. "But further fundamental changes could undermine confidence in the system: Compulsory superannuation is only 20 years old, and the taxation system around it must be maintained. Elements like contribution caps will always need to be monitored and adjusted to take into account the size of account balances and working patterns of Australians, including carers and those that take career breaks. However, ASFA believes the focus for policymakers should be on improving the coverage and effectiveness of the current system rather than throwing it out and starting again."

(RA)

If you have any comments about this story or news tips, contact Christopher Gohlke in New York at cgohlke@globalcustodian.com or Janet Du Chenne in London at jduchenne@globalcustodian.com.