Superannuation tax concessions and the age pension: a principled approach to savings taxation

Vol: 
7/2015
Author name: 
Ingles D
Stewart M
Year: 
2015
Month: 
November
Abstract: 

This paper discusses the tax and transfer treatment of private superannuation retirement saving and the public means tested age pension in Australia. Superannuation savings benefit from concessional treatment in Australia’s tax system by comparison with other forms of saving, measured against an income or consumption tax benchmark. In the drawdown phase, the age pension means test offsets this generous treatment for those in the middle but not at the top end of the distribution. However, it does so in a way that generates disincentives for work in retirement and, perversely, for saving, before and during retirement. We canvass a range of principled approaches that would provide support for saving across the life course while being more neutral and fair in both savings and drawdown phases. We conclude that a more coherent retirement tax and transfer system can be achieved by reducing tax concessions and making the age pension means test less harsh. In the long term, the tax and transfer treatment of retirement savings should be aligned with the treatment of savings in general.

Publication file: 

Updated:  16 July 2024/Responsible Officer:  Crawford Engagement/Page Contact:  CAP Web Team