Wednesday, August 5, 2015
The Australian Council of Social Service (ACOSS) has said that with the cost of tax expenditures ballooning, there is a compelling case for structural reform of inefficient superannuation tax breaks.
Releasing the Council's submission to the Government's retirement incomes review, ACOSS CEO Cassandra Goldie said: "Generous tax breaks come at a high cost and are skewed overwhelmingly towards people on higher incomes. For instance, a person on the top marginal tax rate saves five times as much per dollar invested in super as one on the lowest rate. Half the value of these tax breaks goes to the top 20 percent of taxpayers."
ACOSS has called on the Government to replace the existing concessions with a simple 20 percent rebate for contributions made to superannuation from all sources. The Council estimates that AUD30bn (USD22.1bn) a year is spent on inefficient superannuation tax concessions.
Goldie added that the recent summit of federal, state, and territory leaders had delivered a "wake-up call" on health funding. "Governments cannot continue to provide universal health and aged care services unless tax revenues are restored," she said. Federal health funding to the states is due to be cut by AUD10bn a year.
ACOSS has put forward two options for reforms it said could help fund essential services. In the first instance, the Government could remove the exemption from income tax for superannuation fund earnings after retirement. It could extend the existing 15 percent tax rate on fund earnings in the "accumulation" phase to the "pension" phase over a five-year period, with a three percent increase each year. This 15 percent tax on fund earnings could be offset by a 15 percent rebate for any fund earnings that fall below the taxpayer's tax-free threshold.
The second option proposes the extension of the existing two percent Medicare Levy to tax-exempt and tax-sheltered personal income. This would include superannuation benefits, income accruing in private trusts or companies controlled by an individual taxpayer, non-superannuation termination payments, and "discounted" capital gains received by an individual.