Calls to cut superannuation tax incentives because of their reported size in the Tax Expenditure Statement (TES) are short-sighted and ignore the simplistic nature of these measurements, says SMSF Association CEO/Managing Director Andrea Slattery.
“The release of the updated 2015 Treasury TES has resulted in the predictable criticism that superannuation tax incentives are too generous, and the Government should take immediate steps to reduce them.
“As we have stated many times, the TES measurement of superannuation tax incentives should not be used as a basis for determining retirement incomes policy.
“They are unreliable due to the lack of behavioral change they account for and because of the unrealistic nature of the tax benchmark used to measure incentives.
“If you use a different benchmark against which to measure the impact of incentives, it can lower the cost to Government revenue to about $11 billion – a number that presents a totally different debate.
“It is also inconceivable that we would use a short-term revenue measurement that does not account for the long-term savings to Government through lower age pension spending to assess the performance of superannuation tax incentives.
“It’s not just the SMSF Association saying this. In December the House of Representatives Standing Committee on Tax and Revenue’s report on tax expenditure statements recommended that Treasury model the long-term savings of superannuation tax incentives to Government via lower spending on the age pension.
“That the TES fails to assess the value of the reduction of future Government expenditure on the aged pension because of the tax incentives is a major reason why we argue the system is flawed and needs a total rethink.
“To ensure we have a more informed debate around superannuation it is critical we replace the TES with economic modelling that estimates both the longer-term costs and benefits of superannuation.
“Until we get this, all public discussion on this critical issue is skewed towards a short-term argument over Government revenue requirements.”
Slattery says that when the debate focuses on what superannuation tax incentives mean to government revenue, the end result is that we lose sight of the key objective of the superannuation system – to provide income in retirement and to cut future dependence on the aged pension.
