An article in today's SMH reports that $800b is now in the superannuation accounts of those of retirement age (over 65), which has meant a reduction in reliance of the age pension. Instead of the cost of the age pension rising from 2.9% of GDP in 2001 to a projected 4.6% by 2040, it is now projected to actually fall to only 2.5% by 2038. However, it is also reported that the cost of the concessional tax rates applied to superannuation means that it is costing 1.9% of GDP, which according to the Grattan Institute will rise to 3% of GDP by 2060.
However, while the age pension is a real cost to government, the cost of the concessional tax rate applied to superannuation is not as high as generally reported. Why? Because calculations of the 'cost' of superannuation assumes 'all other things being equal' ie. If someone with taxable income in the top (45%) marginal tax rate has SGL and salary sacrifice contributions into super taxed at 'only' 15%, this is costing the government 30% in tax concessions. However, the reality is that if superannuation wasn't available, those in the higher tax brackets would simply use other means to reduce their tax liability. The projected 'cost' also does not take into account planned changes to the higher tax brackets in 2024-25.
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