The top 5% of taxpayers will enjoy tens of billions in superannuation tax concessions in coming years — and the cost is growing rapidly. But Joe Hockey isn’t interested.
Australia’s richest taxpayers will collect over $35.5 billion in tax concessions via the superannuation system over the next five years, and by 2017-18 they will be taking over $8 billion a year, an analysis of budget figures reveals.
And far from contributing to the burden of helping repair the deficit, the top 5% of taxpayers will enjoy an increase in tax concessions above current levels of over $2.9 billion dollars by 2017. That increase by itself is almost enough to wipe out the revenue generated by the government’s temporary deficit levy on incomes over $180,000, which is forecast to yield just over $3 billion in that period.
According to Australian Tax Office statistics, the top 5% of taxpayers is currently around 640,000 individuals earning upwards of just below $150,000 a year. Based on ACOSS’ more conservative estimate, this 5% group by 2017-18 will be costing taxpayers $8.4 billion in lost revenue via superannuation alone, while the top 12% of taxpayers — people earning around $100,000 a year and above — will cost over $23.6 billion in forgone revenue through superannuation.
As Treasury revealed in the budget, the annual cost of superannuation tax concessions is set to surge in coming years, making the current cost — nearly $32 billion — look paltry as it rises to a remarkable $50 billion in 2017-18. At that point the cost of superannuation will exceed the cost of the age pension — despite one of the core goals of Australia’s superannuation system being to reduce the call on the budget from retirement.
The cost of superannuation tax expenditures surged under the Howard government, which opened up a series of lurks for high income earners to siphon more money into super: contributions and earnings are taxed at a base rate of 15%, while payments to superannuants are not taxed at all. Between 2004-05 and 2005-06, the cost of super tax concessions rose from $17.4 billion to over $23 billion. Subsequent growth was hit hard by the financial crisis, but is now set for a period of strong expansion right when the budget needs all the revenue the government can collect.
Treasury in its 2013 Tax Expenditures Statement estimated that the government could secure around 86% of the revenue forgone through superannuation tax concessions through their removal (the remainder would shift to other tax breaks), meaning just curbing the growth between now and 2017-18 could deliver nearly $15 billion to the government, several times more revenue than the temporary tax levy, twice as much as the cuts to foreign aid, and many multiples of savings through punitive cuts to Newstart.
However, last year Treasurer Joe Hockey walked away from a Labor commitment to begin taxing superannuants’ earnings over $100,000 per annum, foregoing over $3 billion in revenue and ensuring that, for the next five years, the richest Australians will not merely prosper under our super system, they will actually cost the rest of us more than they currently do.