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Savings (superannuation etc)

- see also Assets; Capital gains; Personal income; Older people

Banking on an impact – The impact of the bank levy on the average Australian superannuation account

Matt Grudnoff, The Australia Institute (June 2017). The Australia Institute has tested two claim made in response to the bank levy announced in the Federal Budget: that the impact of the levy will be passed onto customers, and that it will be borne by shareholders, effecting Australian superannuation savings.

In either scenario, the research finds that the levy on the world’s most profitable banks will have minimal impact on ordinary Australians.

“The levy will have only a tiny impact on the average Australian and most of that impact can be avoided by shopping around for a better deal on banking services,” report author and Senior Economist at The Australia Institute, Matt Grudnoff said.

“Our analysis shows if a bank levy was all taken from shareholders it would reduce super returns by only $7 per year or 60 cents a month.”


Chartered Accountants – Federal Budget Tax Bulletin 2017-2018

Chartered Accountants Australia & New Zealand (May 2017).  The 2017-18 Federal Budget indicates that the government is in a state of readiness for an earlier than expected Federal Election.

The pre-Budget announcement of needs-based school funding – together with big bets on infrastructure, the removal of the Medicare rebate freeze, a crackdown on non-residents investing in Australian real estate and a one year reprieve for the popular small business $20,000 instant asset write-off – will have broad appeal to voters.

In terms of the economic outlook, the Treasurer remains optimistic that Australia will continue its slow recovery, returning to surplus by 2020-21. This rosy outlook is based on assumed real GDP growth of 3% per annum.

Overall we are pleased with the superannuation measures announced, which demonstrate the need for a comprehensive review of the financial arrangements impacting on retirement – particularly superannuation, taxation, aged care and social security – to ensure that the whole system is fair, sustainable and fit for the long-term.


CPA Australia -  2017-18 Federal Budget Report

CPA Australia (May 2017). A detailed summary of the tax, superannuation, housing affordability, small business and other key measures announced in the Australian Federal Government’s 2017-18 budget.


Supplementary Submission to Senate Standing Economics Committee Inquiry into the Superannuation (Objective) Bill 2016

John Daley and Brendan Coates, Grattan Institute (February 2017). Understanding how people really save for retirement matters. Given the differences in how households save, no policy will strike the optimal balance between working and retirement income for every household. The best that policymakers can hope for is a reasonable balance between the different situations of a diversity of households. To achieve this, any objective for superannuation must acknowledge the diversity of savings behaviour, and the substantial savings outside of super that exist to support the retirement of many Australian households.


Submission to Senate Standing Economics Committee Inquiry into the Superannuation (Objective) Bill 2016

John Daley and Brendan Coates, Grattan Institute (December 2016). This submission summarises recent work by Grattan Institute relevant to the Government’s proposed objective for the superannuation system as set out in the Superannuation (Objective) Bill 2016.


Information paper: changes to superannuation

Professor the Hon. Stephen Martin, CEDA (December 2016). The Treasury has stated the superannuation changes will create a more equitable system. The changes seek to address the fact that taxation incentives offered, mostly benefit the rich, with the top 20 per cent of income earners accounting for 58 per cent of superannuation tax concessions. For those with substantial earnings, concessional contributions offer a way for individuals to avoid paying the tax usually associated with their income bracket.


2016 budget superannuation reforms

Emily Millane, Tax and Transfer Policy Institute (December 2016). The 2016 budget superannuation reforms aim to tighten tax concessions received by those on high incomes. The reforms result in minimal savings – approximately $3 billion over the forward estimates – while doing little to address underlying inequities in the system. As the Government itself notes, 96 per cent of individuals in the superannuation system will be unaffected or be better off as a result of the package. This gives some indication of the very modest changes introduced.


Annuity and estate taxation in an entrepreneurship model

Cagri Kumru and Arm Nakornthab, ARC Centre of Excellence in Population Ageing Research (February 2016). This paper analyses the interaction between estate taxation and annuity demand both analytically and quantitatively.


A better super system: assessing the 2016 tax reforms

John Daley and Brendan Coates, Grattan Institute (September 2016). Winding back superannuation tax breaks is an acid test of our political system, and should be one of the first items of business in the current Parliament. The Federal Government’s plan to restrict superannuation tax breaks would create a fairer superannuation system more aligned to its purpose of providing income to supplement the Age Pension. The plan would not only trim overly generous super tax breaks enjoyed by the top 20 per cent of income earners – people wealthy enough to be comfortable in retirement and unlikely to qualify for the Age Pension – it would save about $800 million a year. The Government’s proposals would affect about 4 per cent of superannuants, almost all with enough income and assets to prevent them from ever qualifying for a part Age Pension. Claims that the proposed changes would be retrospective are incorrect. Many reforms affect investments made in the past, and no-one suggests they are retrospective. The changes will simply affect taxes paid on future super earnings, and entitlements to make future contributions to super. Alternative proposals by the Australian Labor Party, which broadly supports the Coalition’s reforms, would save more than $2 billion a year. Many of these alternatives would further align superannuation with its core purpose. There is broad agreement between the Government’s proposals and the ALP’s policy. If the Government concedes on some of the details to get a deal with the ALP in the Senate, it will probably improve the budget position. The Government’s considered position is built on principle, supported by the electorate, and our main parties largely agree on both ends and means. In these circumstances, a failure to get reform would signal there is little hope for either budget repair or wider economic reform. While the superannuation proposals are an important step in the right direction, they are only a step. Even with these reforms, super tax breaks will still overwhelmingly flow to high-income earners. And the long-term cost will remain unsustainable. Further changes will be needed in future.


Superannuation tax concessions and the aged pension: a principled approach to savings taxation

David Ingles and Miranda Stewart, Tax and Transfer Policy Institute (November 2015). This paper discusses the tax and transfer treatment of private superannuation retirement saving and the public means tested age pension in Australia.


Superannuation tax concessions and the age pension: a principled approach to savings taxation

David Ingles and Miranda Stewart, Crawford School of Public Policy College of Asia and the Pacific Tax and Transfer Policy Institute, Australian National University (November 2015). This paper discusses the tax and transfer treatment of private superannuation retirement saving and the public means tested age pension in Australia.


Super tax targeting

John Daley and Brendan Coates, Grattan Institute (November 2015). Better targeting of superannuation contributions tax breaks could save the budget $3.9 billion a year, and a 15 per cent tax on the superannuation earnings of retirees could raise another $2.7 billion a year. The current system of tax breaks for superannuation is expensive and unfair. Tax breaks should be targeted more tightly at their policy purpose, which is to encourage savings to supplement or replace the Age Pension. Tax concessions cost the budget more than $25 billion a year in foregone revenue, and most of the benefit goes to those who don’t need them. More than half the benefit of current superannuation tax breaks flows to the wealthiest 20 per cent of households who already have enough resources to fund their own retirement. In tight budgetary times, these costs are unsustainable and must be reined in. Three reforms could better align tax breaks with the goals of superannuation. One, contributions from pre-tax income should be limited to $11,000 a year. Eighty per cent of contributions above this level come from people likely to retire with enough assets to be ineligible for an Age Pension even without such big super tax breaks. Two, lifetime contributions from post-tax income should be limited to $250,000. Three, earnings in retirement – currently untaxed – should be taxed at 15 per cent, the same as superannuation earnings before retirement. The wealthiest 10 per cent of retirees pay no tax on their average super earnings of $85,000 a year. The proposed reforms are fair. They would only apply to future contributions and earnings. Younger and low-income people would not have to pay so much in other taxes if super tax breaks for rich old men were wound back. Previous repeated changes to superannuation have been too timid. Decisive reforms are needed to narrow the wide gap between the goals of the system and what it delivers.


The super challenge of retirement income policy

CEDA (September 2015). Australia’s three-pillar approach to retirement income is internationally well regarded. However, many Australians currently approaching retirement face potential poverty, especially if they do not own their own homes.

Australia’s aged dependency ratio (the number of people over 65 for every working-age person 15 to 64) is expected to double over the next 40 years, and the Australian Government recognises that current arrangements are fiscally unsustainable.
In this policy perspective, The super challenge of retirement income policy, CEDA examines:

  • A history of government support for retirement in Australia;
  • Market failure and the retirement income system;
  • Alternatives to the current retirement income system; and
  • Living income- and asset-poor in retirement

Superannuation Policy for Post Retirement: Volume 2

Australian Government Productivity Commission (July 2015). This report is a detailed analysis of two aspects of superannuation policy affecting the post-retirement phase:

  • What might happen if the age that individuals can access their superannuation (the ‘preservation age’) were raised?
  • Is the way people draw down their superannuation, and in particular, the use of lump sums, problematic?

As part of its research for this paper, the Commission has developed a model – referred to as the Productivity Commission Retirement Model (PCRM) – to assess the effects of increasing the preservation age.


Superannuation Policy for Post Retirement: Volume 1

Australian Government Productivity Commission (July 2015). This report is a detailed analysis of two aspects of superannuation policy affecting the post-retirement phase:

  • What might happen if the age that individuals can access their superannuation (the ‘preservation age’) were raised?
  • Is the way people draw down their superannuation, and in particular, the use of lump sums, problematic?

As part of its research for this paper, the Commission has developed a model – referred to as the Productivity Commission Retirement Model (PCRM) – to assess the effects of increasing the preservation age.


A super waste of money: Redesigning super tax concessions

Matt Grudnoff, The Australia Institute (April 2015). Super tax concessions are increasingly being used by high income earners as a way of minimising their tax. This is not their original purpose. They were designed to encourage people to save for their retirement so they would be more self-reliant and less dependent on taxpayers.
80 per cent of those who are of eligible age are on the age pension or part pension and this is predicted to still be the case in 2050. It would seem that super tax concessions are not working. Worse, almost $18 billion (60 per cent) of super tax concessions are going to the top 20 per cent of income earners. These are the people most likely to be a part of the 20 per cent not receiving an age pension. There is no economic justification for taxpayer’s money being spent on enlarging the super balances of those that are not likely to ever claim a pension. This means that about $18 billion is being wasted each year on unnecessary tax concessions.
Reform of super tax concessions is long overdue and should start from the principle that the only justification for using taxpayer’s money is if it reduces long term impacts on the budget.


Super for some: Who wins and loses from 30 billion worth of tax concessions for superannuation

Richard Denniss, The Australia Institute (April 2015). Richard Denniss, Executive Director of The Australia Institute and long-time advocate of overhaul to the super tax concessions scheme, has welcomed moves on the issue by the Australian Labor Party but says it needs to be the start, not the end of the conversation.


Nothing liberal about Australia’s superannuation industry

The Australia Institute (July 2014). The Liberals will tell you that they don’t like telling people how to live their lives. Indeed they regularly tell us that individuals, not governments, are best placed to make decisions about what is in their own best interest. But, like successive ALP and Coalition governments, Tony Abbott and his team are big fans for forcing each and every working Australian to spend at least 9.25 per cent of their income buying financial products.

Last year, Australians spent more than $93 billion buying financial products from the Australian superannuation industry. And last week we learned that even the former head of the Commonwealth Bank can’t understand why Australians pay the highest prices in the world for financial services. Here’s a tip, maybe it’s because we force people to buy a complicated product that even experts struggle to explain clearly. And maybe it’s made worse by the fact that most Australians think that ”financial advisers” can’t be trusted to give them impartial advice.

Australians are being robbed blind by the financial sector. Last year we paid more than $20 billion in fees and charges for superannuation alone.  We spent an extra $5 billion on financial advice. That is about 10 times what the Australian government spent on mental health.


Flattening Tax Incentives for Retirement Saving

Barbara Butrica, Benjamin Harris, Pamela Perun and Eugene Steuerle, Urban Brookings Tax Policy Center (June 2014). Under current US law, a large share of tax benefits for retirement saving accrues to high-income employees. We simulate the short- and long-term effect of three policy options for flattening tax incentives and increasing retirement savings for low- and middle-income workers. Our results show that reducing 401(k) contribution limits increases taxes for high-income taxpayers; expanding the saver’s credit raises saving incentives and lower taxes for low- and middle-income taxpayers; and replacing the exclusion for retirement saving contributions with a 25 percent refundable credit benefits primarily low- and middle-income taxpayers, and raises taxes and reduces retirement assets for high-income taxpayers.


Super Sting: how to stop Australians paying too much for superannuation

Jim Minifie, Grattan Institute (May 2014). Australians are paying up to three times more than they should for superannuation. Excessively high fees are seriously damaging their retirement balances and hurting taxpayers, who pay more for pensions when superannuation runs short. Reducing fees by half could save account holders $10 billion a year. It is the largest single opportunity for micro-economic reform in the Australian economy.


Sustaining Us All In Retirement

The Australia Institute (April 2014).  As Australia’s population ages, government policies that assist retirement will become even more essential. Superannuation tax concessions and the age pension are the two key government policies that assist the ageing, but they are becoming increasingly expensive. Increasing costs have prompted the Treasurer, Mr Joe Hockey to suggest the pension age be increased to 70. This suggestion is part of an austerity narrative being used by the government to justify broader spending cuts to health, education and welfare support. This paper shows super tax concessions, most of which are being claimed by people able to afford early retirements if they choose, will soon cost more than the age pension.
The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14. These concessions are projected to rise to $50.7 billion in 2016-17, an increase of around 12 per cent per annum. By this time superannuation tax concessions will be the single largest area of government expenditure. The overwhelming majority of this assistance flows to high income earners. Low income earners receive virtually no benefit. The combined cost of these two policies will be $74 billion in 2014 alone. With an ageing population the dual pension/superannuation system will become increasingly expensive. The government’s own projections are that the cost of super tax concessions as a share of GDP will exceed that of the age pension by 2016-17.
This paper presents an alternative model that could produce a fairer, more adequate and more sustainable retirement system. It proposes that we abolish tax concessions for superannuation and create a universal (non-means-tested) age pension. This proposed system is similar to the approach taken in New Zealand where labour force participation among older people is higher than in Australia.


Reforming Australia’s Hidden Welfare State: Tax Expenditures as Welfare for the Rich
Dr Benjamin Spies-Butcher and Adam Stebbing, Centre for Policy Development, (February 2009).  Discusses problems with Commonwealth tax expenditures and outlines possible reforms to superannuation that could enhance fairness and transparency in government spending.


Jobs Australia’s Statement of Reform Priorities
David Thompson (September 2011).  Jobs Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


Exposure draft for Tax Laws Amendment (Sustaining the Superannuation Contribution Concession) Bill 2013
The Parliament of the Commonwealth of Australia House of Representatives

The Government has released for public consultation an exposure draft for Tax Laws Amendment (Sustaining the Superannuation Contribution Concession) Bill 2013 and the accompanying explanatory memorandum. Very high income earners receive a higher superannuation tax concession than average income earners. The changes contained in the Bill will effectively ensure that very high income earners will receive a superannuation concession on their contributions more closely in line with the concession received by average income earners. This will improve the fairness of the taxation of the superannuation system.


Tax Laws Amendment (Sustaining the Superannuation Contribution Concession) Bill 2013 Explanatory Memorandum
The Parliament of the Commonwealth of Australia House of Representatives

The Government has released for public consultation an exposure draft for Tax Laws Amendment (Sustaining the Superannuation Contribution Concession) Bill 2013 and the accompanying explanatory memorandum. Very high income earners receive a higher superannuation tax concession than average income earners. The changes contained in the Bill will effectively ensure that very high income earners will receive a superannuation concession on their contributions more closely in line with the concession received by average income earners. This will improve the fairness of the taxation of the superannuation system.


Super for some: who wins and loses from $30 billion worth of tax concessions for superannuation
The Australia Institute (March 2013)

Australia’s compulsory superannuation system has delivered a large pool of retirement savings and boosted the retirement incomes of many Australians. However, the fact that the superannuation scheme has benefits does not mean that it should not be carefully examined and genuinely reformed.


Council of the Aging Statement of Reform Priorities
Ian Yates (September 2011)

Council of The Aging (COTA) statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


United Voice Statement of Reform Priorities
Louise Tarrant (September 2011)

United Voice’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


Equal Rights Alliance Statement of Reform Priorities
Marie Coleman and Ruth Medd (September 2011)

Equality Rights Alliance’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


Anglicare Australia Statement of Reform Priorities
Kasy Chambers (September 2011)

Anglicare Australia’s statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


Uniting Care Wesley Adelaide Statement of Reform Priorities
Simon Schrapel (September 2011)

Uniting Care Wesley Adelaide statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


Australian Council of Trade Unions Statement of Reform Priorities
Jeff Lawrence (September 2011)

Australian Council of Trade Unions’ statement of taxation reform priorities in preparation to the Tax Forum 4-5 October 2011.


Summary of ACOSS proposals, Henry Review recommendations
Australian Council of Social Service (5 Apr 2011)

This is a brief summary of the Henry Review’s key tax reform proposals and compares them with those advanced by ACOSS, and the Government’s response.


National Tax Forum discussion paper
Australian Government (28 July 2011)

Discussion paper released by the Australian Government in the leadup to the National Tax Forum in October 2011, particularly dealing with the six sessions to be included at the forum: Personal tax, transfer payments, business tax, state taxes, environmental and social taxes, and tax system governance.


Bang for your buck
Industry Super Network (Nov 2010)

An assessment of the impact of the key recommendations made by the Henry Review and identifies a number of issues which would make implementation of the reforms difficult. It finds that the Government’s alternative proposed reforms will be a relatively efficient means to lift retirement savings.


Note by Adam Stebbing
Australia’s Tax Concessions For Superannuation


The Great Superannuation Tax Concession Rort
David Ingles, Australia Institute (February 2009)

A research paper examining the cost of superannuation tax concessions.


Taxation, Social Justice and Economic Development
Julian Disney, Director – Social Justice Project (3 April 2009)

Paper delievered at the Australian Council of Social Service (ACOSS) National Conference. Includes workers, families, housing, transport, savings.


Submission on Retirement Incomes to the Henry Tax Review
Industry Super Network (21 September 2009)

Supplementary submission on retirement incomes to Australia’s Future Tax System Review.


Assets for All
Gerard Brody and Elizabeth McNess, Brotherhood of St Laurence (December 2009)

A brief overview of current tax concessions and other government support for savings, housing and other assets.


Progressive Tax Reform: Reform of the Personal Income Tax System
Australian Council of Social Service (November 2009)

This report advocates strengthening the personal income tax system in order to achieve progressive tax reform. It covers topics such as personal income tax rates, consumption taxes, company income taxes, taxation and saving, taxation and the transfer system.