The Grattan Institute, defining itself as contributing "to public policy in Australia as a liberal democracy in a globalised economy", opines that the tax breaks on superannuation are excessively generous and should be wound back to help fix the budget, and recommends:
- Raising Division 293 tax, which curbs tax breaks to high-income earners on their pre-tax super contributions, from 30 per cent to 35 per cent, and lowering the income threshold at which the tax applies, from $250,000 to $220,000 a year. This would save the budget about $1.1 billion a year and stop many high-income earners benefitting from larger tax breaks, per dollar contributed to their super, than low- and middle-income earners.
- Lowering the cap on pre-tax super contributions, from $27,500 to $20,000 a year. This would save about $1.6 billion a year, mostly by reducing voluntary contributions made by older, wealthier Australians to minimise their income tax bills.
- Abolishing carry-forward provisions and government co-contributions, which were intended to encourage catch-up contributions but in fact facilitate tax minimisation. This would save about $1.1 billion a year.
- Taxing all superannuation earnings in retirement at 15 per cent – the same rate that applies to super earnings before retirement. This would save more than $5.3 billion a year.
- Taxing earnings on super accounts larger than $2 million – rather than $3 million as proposed by the Albanese Government – at 30 per cent. This would save about $3 billion a year, compared to about $2 billion a year under the government’s plan.
So buckle up for a rocky ride! They're not done yet!
P.S. ... the Labor government should take a good hard look at the abused and misguided National Disability Insurance Scam Scheme:
