The Minister for Financial Services, Stephen Jones, has said that the objective of superannuation, as seen by the government, is to “provide retirement income for Australians” — an objective that funds boasting tens of millions of dollars fail to meet.
Speaking on ABC’s News Breakfast on Friday, Mr Jones said: “If people have got superannuation balances in excess of $100 million or even $50 million, I think it’s pretty hard to argue that that’s about retirement income.”
“It might be about estate management, it might be about tax management, but it’s not about retirement income. And that really is not the purpose of superannuation.”
Answering calls for superannuation to be capped at $5 million, Mr Jones said that while the upcoming consultation doesn’t have a “preconceived outcome”, “$5 million is a lot closer to the purpose of superannuation than $100 million”.
A number of organisations, including the Australian Institute of Superannuation Trustees, have previously urged for the introduction of a $5 million limit on super balances.
Research has shown that Australians with a balance at this level are able to achieve annual earnings tax concessions of around $70,000.
Tax concessions for superannuation have been a topic of discussion for some time, with think tank, the Australia Institute, revealing on Friday that these tax concessions could cost the budget $52.6 billion over the 2022–23 financial year.
According to the institute’s research, this puts super tax concessions in the top three expenditure programs by cost in this year’s federal budget, ahead of the NDIS at $35.5 billion and just behind the value of the entire age pension program at $55.3 billion.
“The current system is not taking pressure off the budget to provide a dignified retirement for all Australians, but it certainly is providing a lucrative tax avoidance facility for multimillionaires,” said Australia Institute executive director Richard Denniss.
“Reasonable people will disagree about the role of super in modern Australia, but this data shows an unsustainable system with a small number of account holders reaping the benefits. This was never the purpose of superannuation.”
According to previous comments made by Mr Jones, there are some 32 self-managed super funds with more than $100 million in assets. The largest self-managed super fund is believed to hold over $400 million in assets.
“If the objective of superannuation is to provide a tax preferred means for estate planning, then you could say it’s done its job pretty well. Don’t get me wrong, the government celebrates success but the concessional taxation of funds like these has a real cost to the budget,” Mr Jones said at The AFR Super and Wealth Summit in November.
Moreover, Mercer previously found that tax concessions enjoyed by a $10 million self-managed super fund could fund 3.1 full age pensions.
When recently asked about potential changes to super tax concessions, Treasurer Jim Chalmers said that the government’s priority to date has been spending restraint and winding back wasteful spending, but he noted that tax reform has a role to play as well.
“One of the reasons why we want to legislate the objective is because we want to clarify and lock that down so that that guides the decisions of future governments, and part of making superannuation the best version of itself is making sure that it can be sustainable,” he said.
“We’ve made that point for some time. You want to make sure that all of the various concessions are sustainable in this area, but in other areas as well. When it comes to the NDIS, when it comes to superannuation.”
