Super has become a taxpayer-funded inheritance scheme for the rich. Here's how to fix it – and save billions
- Written by Joey Moloney, Senior Associate, Grattan Institute
Australia’s A$3.3 trillion superannuation system is supposed to boost people’s retirement incomes. The government says as much in its proposed leglislated objective for superannuation. The system is supported by billions of dollars of tax breaks each year, ostensibly to that end.
But there’s just one problem – increasingly, much of what is saved is never spent.
Our new report, Super savings: Practical policies for fairer superannuation and a stronger budget, points out that without an overhaul, super tax breaks are set to do little more than boost the inheritances of Australians with well-off parents.
Super contributions and super earnings are both taxed more lightly than other income. These tax breaks cost the budget about $45 billion (2% of Australia’s gross domestic product, or GDP) each year.
Treasury predicts that figure will hit 3% of GDP by 2060, and that the cost of super tax breaks will overtake the cost of the age pension by as soon as 2036.