The political climate is right for bipartisan support on a range of issues facing superannuation, the Association of Superannuation Funds of Australia (ASFA) believes.

Presenting ASFA’s research into very high superannuation account balances Pauline Vamos, chief executive, said tax concessions provided the starting point for a bipartisan conversation about superannuation’s role in the wider economy taking into account the intergenerational report, tax inquiry and the financial systems inquiry.

“On some issues the climate is right for bipartisan agreement,” said Vamos. “All sides of Parliament understand that we do have an ageing population. Listening to both the Treasurer and the Leader of the Opposition, both parties do seem to have concerns about ensuring there are properly targeted tax concessions in the superannuation system. So that is a strong start to bipartisan support.”

Vamos said that the whole tax system needed to be considered as there was little point of reducing the extraordinarily wealthy’s tax free benefit in super if they moved their money into a another savings vehicle that was tax free.

She made the point that while tax concessions were a good starting point the conversation before any decisions are made an agreed bipartisan objective is needed for superannuation.

A considered response, taking into account the likely changes of investment behaviour to mitigate the unintended consequences of changing tax in superannuation, is also the position of John Randall, superannuation partner at Deloitte. The rich will still need to put their money somewhere, he said, and as a society it is worth considering where the incentives for investment should lie.

Treasury officials admit that if a cap was introduced the government should not expect to receive the equivalent in tax as concessions in superannuation (see graph below from AIST-Mercer’s Super Tracker which shows current government concessions over a person’s lifetime based on their income percentile) because a cap will alter investment behaviours.

 

Total level of government support (over a lifetime by income deciles)

Source: AIST Mercer Super Tracker: How the super system stacks up on fairness, adequacy, and sustainability (pg 7)

Key findings from ASFA’s very high superannuation account balance research include:

  • Around 210,000 Australians have superannuation account balances in excess of $1 million, with around 70,000 in excess of $2.5 million
  • 475 individuals have an account balance in excess of $10 million, receiving an average tax free income stream of $1.5 million annually
  • 24,000 retired self-managed superannuation fund (SMSF) members have balances of more than $2 million, and receive an average income stream of $216,000 per year tax free
  • In contrast, around 232,000 members with balances of less than $1 million received an average income of around $38,000.