Since election day, conservative media have decided to begin a scare campaign around the government’s proposed changes to the tax concessions on superannuation. Currently, the earnings in superannuation funds are taxed at just 15%. This is a significant tax concession for most people and a very large one for the richest in Australia, who would be paying a 45% rate if super was taxed like income.
This means that the richest in Australia are getting a 30% tax break on their super, so it is little wonder that many of them are using super not to save for their retirement, but to avoid paying tax.
Superannuation tax breaks are being abused
The entire reason for the superannuation tax concessions is to encourage people to save for their retirement so they will not need to go on the age pension. This, in theory, reduces the burden on the government.
But the problem is that when you offer the richest people in Australia a 30% tax break, they will take advantage of it. The richest 10% – most of whom would never be eligible for the age pension receive $22bn in tax breaks by having money in super rather than having it taxed like income.