In its latest submission to the government ahead of the federal budget later this month, the Australian Institute of Superannuation Trustees (AIST) has asked the government to introduce a $5 million limit on total superannuation balances.
AIST made a similar request of the previous Morrison government in its pre-budget submission earlier this year.
Much like then, today the group is asking the Labor government to require individuals that exceed that $5 million cap, of whom there are 11,000 according to the Retirement Income Review, to withdraw the excess amount by 1 July 2024.
The government’s retirement review found that people with a super balance of $5 million could achieve annual earning tax concessions of around $70,000.
As such, according to AIST, the proposed changes would further improve the equity of tax concessions and support to achieve a comfortable retirement.
“The current level of lifetime government support provided through the retirement income system is heavily weighted towards those in higher income brackets,” AIST said.
“Given that this cohort has a greater capacity to support themselves in retirement, it is not only an inequitable situation but also unsustainable as the population of Australia ages,” the institute noted.
It added that this proposal would have widespread support across the superannuation industry and would be an important step towards addressing issues identified by the Retirement Income review.
In its latest submission, the group cited analysis by Mercer that found the tax concessions enjoyed by a single $10 million self-managed super fund could fund 3.1 full age pensions.
Moreover, it argued that tax concessions offered to SMSFs with balances exceeding $10 million could fund 240,000 full age pensions each year.
“While unreasonably large balances are allowed to remain in the concessionally taxed environment of super, very wealthy people will continue to disproportionately benefit,” AIST said.
Back in February, Mercer too demanded that super be capped at $5 million citing inequality in Australia’s super system as a key motivator.
“We know that the biggest beneficiaries of the current super tax concessions are in fact those that need it the least — high-income earners,” said Mercer senior partner Dr David Knox at the time.
“While there has been no shortage of commentary that lower-income earners need greater concessions, we must find a way for reforms to be financially sustainable and place no added financial strain on the federal budget.”
In addition, Mercer at the time also proposed that a 15 per cent tax rate be applied to all investment income received by super funds and that a concession of 15 to 20 per cent be provided for all concessional contributions below existing annual limits.
