The superannuation industry has rejected claims that the rich are favoured by taxation laws and says calls by the Greens and a social welfare group to boost the level of tax on higher income earners would compromise retirement savings.
Roughly half of the $15 billion in tax breaks for superannuation contributions went to the top 12 per cent of income earners, according to new research being presented to the Senate this week by the Australian Council of Social Service (ACOSS).
Greens leader Bob Brown this month said the federal government should tax superannuation contributions based on an individual's marginal tax rate minus 15 percentage points instead of contributions and earnings being taxed at a flat rate of 15 per cent for all Australians.
However, fund manager and industry groups said the proposal would hinder retirement savings, with new research also showing government retirement benefits were broadly spread across income groups.
"People need all the incentives possible to save for their own retirement, given the future strain on our public pension system as the population ages and the working tax base shrinks. So the notion of taxing super contributions at one's marginal tax rate seems entirely contrary to this objective and also presents yet another unnecessary level of complexity to the system," PIMCO Australia head of global wealth management Peter Dorrian said.
"If anything, we would suggest that this proposal and the imposition of the low contribution caps will act as a disincentive to people ensuring they have the maximum level of retirement savings, and ultimately result in further drain on the whole taxation system."
A report released last week by the Association of Superannuation Funds of Australia (ASFA), "The equity of Government assistance for retirement income in Australia", found tax concessions for superannuation were predominantly equitable.
As a result of tighter contributions caps and other factors, the top 5 per cent of employees in terms of income accounted for less than 20 per cent of the total super contribution in 2009/10.
"The bulk of tax concessions on super flowed to the majority of Australian employees who are on marginal tax rates of 30 and 38 per cent," ASFA cheif executive Pauline Vamos.
ASFA pointed out that the figures most often quoted by proponents for tax changes to super were from 2005/06, when much higher contributions caps applied. The proposed increase in the superannuation guarantee to 12 per cent and the low-income earners contribution tax rebate, combined with lower contribution caps, made the application of the tax concessions even more equitable, it said.
According to separate analysis from Mercer, low, middle and high-income earners all enjoyed benefits from government retirement funding.
The report, "Tax, Super & the Age Pension: assessing the value of total government support", also released last week, found that while high-income earners received more in tax concessions, they missed out on the means-tested age pension.
"The result is the level of total government support provided for retirement income is almost constant across individuals, regardless of their different lifetime incomes," Mercer retirement, risk and finance senior partner Dr David Knox said.
The report is based on modelling for eight individuals at varying levels of income, from a part-time, low-income earner on $34,000 a year through to a high-income earner on almost $278,000.
"This spectrum covers the vast majority of Australian workers' incomes, and reveals a high level of parity when it comes to government funding for retirement," Knox said.
