Tax breaks on super eroding savings
Industry Super Australia (ISA) has called for a reworking of tax breaks around superannuation claiming current policies penalise those with low wages while giving a sizeable boost to high income earners.
ISA claimed that unless the current tax policies were changed around half of the population retiring up until 2055 would not have enough income to achieve a comfortable retirement with women more adversely affected than men.
ISA made the claim as part of its submission to the Tax Review and used modelling provided by actuaries Rice Warner that found 63 per cent of single women, 50 per cent of single men and 45 per cent of married couples will fall below the comfortable retirement standard even after taking into account their super, the pension and other savings combined.
ISA chief executive David Whiteley pointed to ‘poorly targeted' tax breaks on superannuation which were "wildly out of balance between high income earners and those on medium to lower wages".
He said the ISA analysis found that tax breaks given to the top 1 per cent of income earners would double their retirement income while those on low wages and who were ineligible for a tax break on superannuation faced a 14 per cent reduction on their superannuation income while tax breaks for middle income earners would increase their retirement income by only a third.
"As a result [of current tax policy], the income of the top 1 per cent of couples retiring in 2055 will be almost 10 times higher than couples at the lowest end of the income scale," Whiteley said.
"We know that 63 per cent of single women will not have enough to retire comfortably under existing policies. However this rises to an alarming 80% when the proposed tightening of the pension asset test is added to the equation."
As part of its submission ISA said the gap could be closed by re-calibrating superannuation tax breaks, raising the Super Guarantee to 12 per cent and re-instating the Low Income Superannuation Contribution.
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