Presentation on theme: "Taxation of Superannuation Hazel Bateman Centre for Pensions and Superannuation UNSW February 2009."— Presentation transcript:
Taxation of Superannuation Hazel Bateman Centre for Pensions and Superannuation UNSW February 2009
1. Alternative tax regimes for retirement savings Tax points – contributions (T), fund earnings (T), benefits (T) Alternative tax regimes Comprehensive income tax – TTE, ETT Expenditure tax – EET, TEE Hybrid – TTT Personal income tax OR specific super taxes
3 2. How we tax super? Contributions (T) Fund income (T) Benefits (E) Different tax treatment by: Employee Employer/salary sacrifice Self employed Govt co-contribution Spouse, child Contribution caps Deductible contributions (15%) Interest (15%) Dividends (15%), imputation credits Overseas income (15%), FTCS Capital gains (10%) In retirement - earnings on underlying assets, tax exempt for – broadly defined - income streams satisfying min standards Taxation depends on: Tax status of super fund Age – benefits tax free if 60+
4 3. How did we get here? Pre 1983EEt: some contributions deductible, no tax on fund income, very concessional taxation of lump sums (not income streams) 1983-1988EET: some contributions deductible, no tax on fund income, lump sum taxes (15/30), some tax concessions for annuities 1988TTT: 15% tax on deductible contributions, 15% fund income, lower lump sum taxes, 15% annuity rebate, RBLs 1988-2007TTT: Increased complexity - age based contribution limits, superannuation surcharge, life and life expectancy income streams, TAPs encouraged under tax/transfer system From 2007TTE: Simpler Super - Benefit taxes removed if aged 60+, RBLs abolished, common tax/transfer arrangements applied to broadly defined complying income streams, contribution caps
5. Issues arising from current super tax arrangements Flat rate super tax on contributions and fund earnings (15%), separate from income tax Regressive (increasingly so over time) Tax concessions skewed to high income earners Complexity in seeking equity (contributions taxes, caps, rebates, co-contributions etc…) Tax free benefits from 60+ huge concessions to high income retirees, difficult to design drawdown incentives (but has reduced EMTRs in retirement) Tax on savings in super (fund earnings) differs from other savings, and by age ( age 60) Future tax revenue?
6. Complications Cannot consider super taxes in isolation Super is one part of total retirement income Mandatory and voluntary super Tax concessions and adequacy Integration with age pension – adequacy, means tests, EMTRs Alignment with taxes on labour and other h/hold savings Health and aged care expenses
7. Where to? Abolish super tax regime, align with personal income tax – TEE/EET For example, EET Reintroduces progressivity => equity Simple Improve efficiency Flexibility to provide incentives for super income streams Equiv for taxed and non taxed funds Enables risk sharing Encourages voluntary contributions Future tax revenue