Wealthier Australians brace for more superannuation changes amid government revenue hunt

It is never a good idea to stand between any government and a pile of money so wealthier Australian workers should prepare for some more tinkering with the super system.

While the $3 million cap on superannuation balances will increase taxes on fund earnings from the middle of next year, there are still plenty of rumblings that much more needs to be done to create a flatter playing field for retirement savings.

Of course, that assumes that the $3 million cap passes through the Senate unchanged, which is not yet certain.

The latest indication that change could be in the wings came from the influential Australia Institute, which found that the current system of super concessions is leaving women and low income earners behind.

The report found that high-income earners and men are getting disproportionate benefits from the super tax concessions and that this comes at a huge cost in forgone revenue and exacerbates income and gender inequality.

Winding back concessions for the top 10% recommended

The research recommended that super tax concessions should be ended – or at a minimum wound back significantly – for the top 10% of earners and those whose high super balances do not meet the asset criteria for the part pension.

Incredibly, the report found that super tax concessions cost $54.56 billion in foregone revenue during 2022-23, and are now forecast to overtake the cost of the Age Pension in 2045-46.

“While super tax concessions are designed to help all Australian workers saving for retirement, the distribution of these benefits is incredibly unequal,” said Australia Institute research fellow Minh Ngoc Le.

High income earners get the lion’s share of concessions

“Treasury estimates show that, dollar for dollar, high income earners actually receive more government support than those on middle and low incomes because of our current superannuation system.

“Continuing to provide tax concessions for the wealthiest Australians will soon cost the taxpayer more than the age pension, a complete reversal of what superannuation is designed to do.

Ms Le said it was clear that superannuation tax concessions “are no longer fit for purpose, and forgone revenue from super concessions for Australia’s wealthiest individuals could instead be used to support retired Australians living in poverty.”

Poverty in retirement could be reduced

Her research also found that Australia still experiences above average rates of poverty in retirement, coming in at the sixth highest rate in the OECD.

Some of the other parts of the research were also revealing, notably the fact that the top 20% of income earners receive more than half of all superannuation tax concessions and also that while the share of Australian workers with a super fund above $1 million is just 2.5%, those people made 20.1% of all personal super contributions in 2020-21.

The really juicy carrot from the research for Treasurer Jim Chalmers is that by removing the tax concession for both super contributions and earnings from the top 10% of earners, the Government would save more than $12 billion every year.

Which makes this a very juicy target indeed for a bit more super fiddling in the same vein as the $3 million cap.