Do yourself a favour and head over to Eureka Street to read Brian Toohey’s latest article, Super’s Evil Empire on Shaky Ground. In less than 900 words, Toohey – a long-time advocate of equitable retirement policy and inter-generational fairness – surgically dissects everything that’s wrong with Australia’s compulsory superannuation system, including how the tax concessions create an expensive form of upper class welfare:
…the standard tax rate on super is a flat 15 per cent. For someone on a salary and other non-super income of $250,000, for example, this compares to a marginal rate of 49 per cent following the Budget’s new temporary levy. In a twist that tips the whole purpose of means testing on its head, those who pay no tax on other income below $18,200 pay the 15 per cent on their compulsory super contributions and earnings.
How superannuation concessions cost the Budget billions in foregone revenue:
According to conservative Treasury projections, scrapping the concessions should increase revenue by over $35 billion in 2016–17, rising each year. This money could be used to improve living standards for the workforce via tax cuts and improvements to health care, education and infrastructure. Moreover, reputable studies show that the cost of the concessions outweighs the likely savings on the age pension costs.
And how the superannuation industry has distorted the economy:
Compulsion has another bad result. It distorts the flow of resources away from more productive uses. It encourages fund managers to trade existing financial assets rather than help mobilise capital for productive new investment to boost growth in a country with an ageing population.
Again, I recommend that you read the article in full for yourself as Toohey has nailed it.
