Super system sustainable and equitable: new report

*Media Conference – 10:30am, Canberra

Middle-income earners reap the greatest benefit from tax concessions on superannuation, the peak body for the superannuation industry said today.

The new report by the Association of Superannuation Funds of Australia (ASFA) undermines claims that high-income earners receive more than their fair share of government assistance on super.

The ASFA report, The equity of Government assistance for retirement income in Australia, supports the following:

• Many figures and statistics being used in the current debate on equity in the super system are wrong or out-dated.
• Tax concessions for superannuation are predominantly equitable.
• The proposed increase in the Superannuation Guarantee and the low-income earners contribution tax rebate, combined with the contribution caps, make the application of the tax concessions even more equitable.
• Tax expenditure estimates for superannuation (what tax concessions on super cost Government/taxpayers) are grossly overestimated.

Drawing on previously unpublished data, the ASFA report shows current and proposed measures for the tax treatment of superannuation are considerably fairer than recent debate on the issue would suggest.

“A commonly quoted statistic in public debate, about Australia’s top five per cent of income earners receiving 37 per cent of total superannuation contributions, relates to 2005-06 when much higher contribution caps applied,” said Pauline Vamos, chief executive of ASFA.

“Since then, tighter contribution caps (on the amount of super contributions attracting the concessional tax rate) and other factors have seen this drop to less than 20 per cent.

“In 2009-10 around 90 per cent of employer contributions related to individuals on less than the top marginal tax rate, with over 50 per cent of contributions relating to individuals on a marginal income tax rate of 30 per cent or less.

“The bulk of tax concessions on super flowed to the majority of Australian employees who are on marginal tax rates of 30 and 38 per cent.”

But ASFA acknowledged there was room for improvement in the superannuation system.

“There are gaps in current coverage of superannuation, particularly in regard to the self-employed, which means the universality of the system is reduced; this is inequitable.

“Further, the low contribution caps are an inequitable measure to apply this early in the maturity of the system as it discriminates against women and others with variable work patterns who would like to catch up on their retirement savings when they return to the workforce,” said Ms Vamos.

“Other reforms including Stronger Super and the Future of Financial Advice are already in train to deliver improvements to the system.

“But further fundamental changes could undermine confidence in the system: Compulsory superannuation is only 20 years old and the taxation system around it must be maintained.

“Elements like contribution caps will always need to be monitored and adjusted to take into account the size of account balances and working patterns of Australians, including carers and those that take career breaks.

“However, ASFA believes the focus for policy makers should be on improving the coverage and effectiveness of the current system rather than throwing it out and starting again.”

The ASFA report also raises questions about the methodology used for calculating the cost of tax concessions in super. It estimates the actual cost of super tax concessions could be as little as half that reported in the 2011 Tax Expenditures Statement.

“The superannuation industry is prepared to have the debate about the value and equity of tax concessions,” said Ms Vamos.

“However, it is important the assumptions upon which these calculations are made are accurate. This report shows some of the assumptions are questionable and others, demonstrably wrong.”

*Copies of the full report are available on request.

For your copy of the report, email ASFA Media.

For media enquiries, please call:

Rebecca Glenn, GM Marketing and Communications, 0416 170 439

Megan McDougall, Communications and Media Co-ordinator, (02) 8079 0849

MEDIA CONFERENCE

CEO of ASFA, Pauline Vamos, will today be holding a media conference to outline the findings of the report at Parliament House in Canberra.

Date	Wednesday 15 February 2012
Time	10:30am
Where	Senate Alcove – 2nd floor

About ASFA – the voice of super

The Association of Superannuation Funds of Australia is the peak industry body representing the superannuation and retirement industry. Its members represent over 90 per cent of the approximately 12 million Australians with superannuation. ASFA members manage or advise on the bulk of the $1.3 trillion in superannuation assets as at September 2011. ASFA is the only organisation that represents all types of superannuation funds (retail, industry, corporate and public sector) and associated service providers.