A new report released today by The Australia Institute outlines how the age pension could be strengthened by tackling overly generous and unfair superannuation tax concessions.
Sustaining us all in retirement: The case for a universal age pension, by David Ingles and Dr Richard Denniss, shows super tax concessions will soon cost more than the age pension.
“These tax concessions are projected to rise to $50.7 billion in 2016-17, an increase of around 12 per cent per annum. By this time superannuation tax concessions will be the single largest area of government expenditure. The overwhelming majority of this assistance flows to high income earners. Low income earners receive virtually no benefit,” Executive Director Dr Denniss said.
“If the age pension is said to be ballooning, then superannuation tax concessions are the Hindenburg of the federal budget.”
This paper presents an alternative model that could produce a fairer, more adequate and more sustainable retirement system. It proposes that we abolish tax concessions for superannuation and create a universal (non-means-tested) age pension. This proposed system is similar to the approach taken in New Zealand where labour force participation among older people is higher than in Australia.
The paper suggests that the single pension be increased from $21,018 per annum to $26,273 per annum and the pension rate for couples from $31,689 per annum to $39,611 per annum.
“This system would cost $52 billion a year, almost 30 per cent less than we spend on both the pension and superannuation tax concessions,” Dr Denniss said.
“Lifting the age pension by $5,000 a year and removing the overly generous tax break on superannuation would actually leave the federal budget $13 billion better off.
“A universal pension would create a level playing field amongst income groups and reduce the inequality in Australia’s retirement system. Superannuation would remain but without giving wealthy Australians such a big tax break,” Dr Denniss said.