Treasury revises cost of super tax concessions
Tuesday, 2 February 2016 12:20pm

The estimated cost of superannuation tax concessions to the federal government this year has been revised down by about $4 billion according to the latest Treasury figures.

Treasury released its 2015 Tax Expenditures Statement (TES) on Friday and showed its figure for super tax concessions, on a tax foregone basis, is now estimated at $29.8 billion for 2015-16. This is down from a previous estimate of $33.5 billion last year.

The Association of Superannuation Funds of Australia (ASFA) said the use of a revised methodology by Treasury has led to an improvement in the accuracy of TES forecasts, particularly around super tax concessions over the next five years.

"The revisions to later years are even greater, down from an estimated $45.9 billion for 2017-18 to $32.2 billion," ASFA said.

"The most recent estimates are a considerable improvement on previously published data, but there is still significant work to be done to get an accurate picture of the costs and benefits of superannuation tax concessions."

ASFA chief executive Pauline Vamos said the estimates now clearly take into account the tax concessions relative to the same investment being held outside the superannuation system.

"If funds are invested outside super in similar assets, they would be likely to attract concessions associated with capital gains and the benefits of dividend imputation, which also involve a cost to revenue," Vamos said.

"The more accurate method for estimating tax expenditures confirms that contribution caps are working and that there is not a prospective blowout in the cost of tax concessions for superannuation. Contrary to what some commentators have claimed, the cost of tax concessions for super is not overtaking the cost of the Age Pension."

ASFA believes the actual cost of tax concessions is more likely to be about $16 billion per year.

"When you take into account the savings the government makes on the Age Pension as a result of super, and the impact of behavioural change or people shifting money from one tax-effective vehicle to another that would occur if super tax concessions were removed, a more accurate estimate would be around $16 billion a year," Vamos said.

ASFA said with the current legislated settings for the Superannuation Guarantee (SG), expenditure on the Age Pension is projected to reach 3.6% of GDP in 2054/55. In the absence of superannuation savings, expenditure on the Age Pension would likely reach 5.5% or more of GDP and retirement incomes on average would be lower.

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