Treasury’s jaundiced view of superannuation: leaking revenue

It is hard to believe that the Red Book and bits of the Blue Book have been released under FOI, although it seems that certain bits have been blacked out – eg. the Treasury’s view on the cash-for-clunkers program – no surprise there.  (Who makes the decision to get out the black texta, by the way?)

While there have been previous hints about Treasury’s attitude to superannuation, the criticism of self-managed superannuation funds (SMSF) is instructive as “tax minimisaton vehicle of choice”.  Channelling Brian Toohey, or is Brian Toohey channelling Treasury, there is a strong view that superannuation is essentially a rort for the rich.

This view has been challenged by one of the members of the Cooper Review, Meg Heffron, noting that the tax breaks on superannuation are deliberate government policy to encourage retirement saving.  If someone is to lock up their saving in the form of superannuation who is, say, 35 years of age, and cannot access these funds until the age of 60 or whatever the age the government prescribes, incentives are required.

In this context, the work of David Knox from Mercer Australia is particularly important.

The research shows that those with higher incomes … do receive a higher level of superannuation tax concessions than low income earners – but they are also likely to receive a lower level of government funded aged pension.  What is interesting is the overall cost to the government is rougly the same, regardless of whether the funding is weighted towards tax concessions for a higher income earner or providing the aged pension to a person who needs to top u ptheir income in retirement.

Looking at Knox’s figures, what is apparent is that for middle income earners, saving in the form of superanuuation (compulsory and voluntary) looks like a bit of zero-sum game – just knocking off part-entitlement to the aged pension.

This entry was posted in Treasury. Bookmark the permalink.

4 Responses to Treasury’s jaundiced view of superannuation: leaking revenue

  1. John Bayley says:

    I’ve seen Knox’s presentation at the recent conference of the SMSF Professionals Association of Australia (SPAA).

    I think an even more important point to make here is that superannuation monies – at least in the context of accumulation (i.e. the vast majority), as opposed to unfunded defined benefit (i.e. government) funds – are funded by the owners’ personal exertion, while the Age Pension is funded by other taxpayers.

    So in essence, on one hand we have our own money, where the government magnanimously steals a bit less than usual, and on the other we have money stolen by the state from other people and given to us.

    While the discovery that Treasury harbours such sentiments as the one you mention above are, alas, no longer a surprise, it just drives home the point that a decent clean-up there by a future non-Labor government will be essential, so these public servants take their ideological blinkers off and return to being apolitical, as they are supposed to be.



  2. Samuel J says:

    I still don’t know how the Blue Book got out when Treasury put out this press release

  3. Rob says:

    “I still don’t know how the Blue Book got out when Treasury put out this press release”

    Maybe part of treasury thinks that the coalition really won the election.

  4. Paul says:

    Frankly I see Super just another source of money for the Govt in the future. A vehicle primarily setup to people retiring now rather than in 20-30 years. So all the “save for retirement” spin is just a cover for the boomers to take a nice lump sum, blow the lot and go back onto the pension anyway.
    There is little stability in regulations or tax rates in,out or whatever.
    By the time I reach retirement I see it being a tightly controlled pension, no lump sum payments allowed and the Govt being unable to resist the large pool of cash to pay for whatever harebrained scheme they think will get them re-elected at the next election. Governments in South America have already started looting pension funds, replacing cash with IOUs.

Comments are closed.