The Intergenerational Report shows a massive shift towards supporting wealthier individuals’ retirements

by Jack Thrower


Jim Chalmers suggests the superannuation system is the intergenerational “genius” but it really means providing more support for wealthier people who do not need it.

The Intergenerational Report contains a lot of focus on Australia’s ageing population and the difficulties it will be to support those in retirement. But the Report actually reveals that the big shift is towards a less equitable funding of retirement.

In a recent statement about the IGR, the Treasurer, Jim Chalmers, noted “our population is ageing but our spending on the age pension will fall – that’s the intergenerational genius of super”. Falling spending on the Aged Pension is a technical truth but it masks a regressive reality.

As a percentage of GDP, the IGR reveals that spending on Aged Pensions is set to fall. However, the cost of superannuation tax concessions will rise, more than offsetting the drop in Aged Pension spending.

Superannuation tax concessions are regressive. Australia Institute research from 2021 showed that the top 20% of income-earners receive over 50% of the benefits of superannuation tax concessions, men receive 71.6% of the benefits. The two main super tax concessions are on contributions (money put into super) and earnings (investment returns to super accounts). Broadly, instead of facing standard tax rates, superannuation contributions and earnings are taxed at 15%.

The regressivity of super tax concessions stem from two sources. Firstly, those on high-incomes receive a larger deduction in their tax rate, as reducing 45% marginal tax to 15% is larger than dropping from 19%. Secondly, high-income earners simply receive concessions on a larger amount of money. Someone receiving concessions on $20,000 of superannuation contributions will receive a larger benefit than someone receiving it on $1,000. The Government’s promised reduced concessions on balances over $3 million will mitigate these effects but not significantly.

Lastly, the IGR misleadingly contrasts Australia’s predicted drop in public pension spending with rises in other OECD countries. This does not account for Australia’s tax breaks on superannuation (which exceed any similar arrangements in most other OECD countries) and Australia’s projected younger population and higher retirement age than the OECD averages.

As we can see overall spending on retirement incomes is not set to greatly change, but it is set to shift towards providing tax breaks to those who much less need support than those who qualify for the Aged Pension. This might be a ‘genius’ of some sort, but it is not one that we should be bragging about.

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