The argument that the superannuation contribution caps should remain at current levels, ahead of the Federal Budget, has been disputed by Industry Super Australia.
“The data, analysed by ISA, conclusively shows that so-called ‘catch-up’ contributions that attract a tax concession are not being made by the vast majority of working Australians, especially women on lower incomes and working part-time,” said Industry Super Australia.
According to the analysis “a small number of high income employees” – with an average super balance of $600,000 – are the main beneficiaries of the concessional contribution caps of $30,000 and $35,000.
“The figures simply do not support the arguments being floated in the lead up to the Budget that the voluntary contribution caps should remain as high as they are currently set to allow women to make catch up contributions,” said David Whiteley, Chief Executive of Industry Super Australia.
“The numbers tell us the ‘catch up’ argument is a fiction. A majority of women, especially those in need of help to catch up after years of interrupted work patterns and part-time employment, do not and cannot afford to make large catch up contributions that attract tax concessions and help build super savings.”
Mr Whitely said people on low incomes – paying 19% tax or less on their income – have little capacity to make extra superannuation contributions, and “effectively receive little or no tax concession on super contributions”.
Industry Super Australia argues that the Low Income Superannuation Contribution (LISC) is a more effective means of helping people catch-up on super contributions. However the LISC is currently legislated to end from 30 June 2017.
“From next year, the group that needs the most help will go backwards when the LISC is abolished, unless the government uses next week’s Budget to reverse this tax penalty on lower paid Australians. Reining in tax concessions for high income earners by lowering the voluntary contribution caps to $20,000 would free up over $1.2 billion a year and more than cover the cost of re-instating the LISC,” said Mr Whiteley.
“It’s neither logical nor fair for the LISC group to have its meagre tax concession reduced to 4 cents in the dollar with the abolition of the LISC, while the better-off, catch-up group keeps concessions of at least 22 cents in the dollar, when they are in much less need of assistance.”