The potential revenue gain for Government from superannuation reforms could be much lower than the quoted value of super tax expenditure, according to the latest superannuation tax report from Mercer.
Mercer Senior Partner and author of the report, Dr David Knox, said that by using Treasury’s tax expenditure figures to shape super policy, the Government has ignored age pension savings.
Knox said future age pension costs will inevitably increase if super benefits are reduced by higher tax. Mercer’s report revealed that the cost of super tax concessions to the Government increases by 187% from an average wage earner to someone who earns double the average wage. However, the age pension savings for the Government increase by 310% between the two.
Accounting for pension savings, the net cost of tax concessions for an average wage earner is 63% of the tax concessions. This reduces to 45% for an individual on double the average wage, according to Mercer. As income rises, the cost reduces as a percentage of the concessions; which means there is a direct relationship between tax concessions and age pension costs.
“The cost of super tax concessions to Government is therefore only part of our retirement savings story. Concentrating only on one element is a flawed approach to setting long-term policy that will affect Australians and the Australian economy,” said Knox.
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