Deloitte has called for a standard super concession of 15 per cent for all Australians, arguing it would make the tax treatment of super more equitable and save the government $6 billion a year.
In the second part of a new paper titled Mythbusting tax reform, Deloitte argued for an “updated and simplified” version of the super contributions tax changes proposed in the 2009 Henry Review.
Under Deloitte's proposal, an individual's superannuation contributions tax rate would be the based on their top marginal tax rate, less 15 per cent.
“Everyone [should] get the same tax advantage out of a dollar going into super, with a standard concession of 15 cents in the dollar for both princes and paupers,” said Deloitte.
David Murray’s Financial System Inquiry noted that only $1 in every $200 of the cost of super concessions goes to the bottom 20 per cent of income earners, whereas more than half goes to the top 20 per cent.
In addition, said Deloitte, Treasury’s Intergeneration Report found the share of people receiving the age pension in 2055 will be much the same as today.
“Making the tax incentives for contributing into super the same for everyone also comes with a pretty big silver lining,” said Deloitte.
“As current incentives are weighted towards the better off, there is a tax saving from making super better – a reform dividend of around $6 billion in 2016-17 alone.”
As a bonus, said Deloitte, a flat super concession of 15 per cent would avoid the need for grandfathering (since the change is to the taxation of contributions).
“And because the incentives are simpler and fairer, the current caps on concessional (pre-tax) contributions can also be simpler and fairer,” said the report.
“They could be abolished completely for everyone under 50, and the cap could be raised for everyone else (subject only to a safety net of a lifetime cap).”
The $6 billion raised by the change to the superannuation concession rules could pay for a reduction of the company tax rate from the current 30 per cent to 26 per cent, said Deloitte.
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