With speculation increasing about what approach the government will take to superannuation at the next federal budget, The Association of Superannuation Funds of Australia (ASFA) has called for facts to take centre stage.
ASFA chief executive Pauline Vamos said that to ensure a sustainable retirement system more changes to superannuation may be required, but it was important they be carefully considered and based on facts.
There are three main myths surrounding superannuation that need to be dispelled, concerning its costs and benefits, according to ASFA.
The first is the misconception that superannuation tax concessions cost the government around $32 billion last year. This figure does not take into account cost savings related to the age pension, which ASFA estimated at around $7 billion, or the tax savings that would otherwise have been generated in other advantageous vehicles, such as negative gearing investments.
“A true estimate of the aggregate tax concession for superannuation on an ongoing basis would be around $16 billion. This is roughly half the figure in the Tax Expenditure Statement,” ASFA stated.
It is also a myth that a majority of government support for retirement goes to high income earners, according to ASFA.
Government retirement assistance is broadly comparable across personal income tax brackets, and assistance to those on the highest income levels has decreased substantially through reduced concessional contributions caps, ASFA stated.
When the Age Pension is taken into account, along with tax concessions and rebates, the present value of government assistance is around $300,000 over a person’s lifetime across the range of tax brackets.
“A lower-income person will receive this mostly in the form of the Age Pension, concessionally-taxed contributions and the low-income superannuation contribution, while a person in the top income tax bracket will receive it as tax concessions for super,” Ms Vamos said.
ASFA said it was also a myth that government funds spent on super tax concessions would be better spent elsewhere, because super plays an important role in providing the foundations for economic activity and prosperity.
The increase in household savings is expected to rise to 2.5 percentage points of GDP following the increase in the compulsory superannuation guarantee, ASFA stated.
“This helps Australian businesses and government to finance investment and infrastructure without having to rely unduly on foreign savings and investment,” Ms Vamos said.
Superannuation benefit payments, including lump sums, pension payments and insurance payouts, already boost domestic demand by over $50 billion a year and this figure could increase four-fold by 2040, according to ASFA.
