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The superannuation tax concession: benefit or barrier?
Abstract

The superannuation tax concession: benefit or barrier?

Gabrielle Parle
2007 University Research Conference Book of Abstracts, p.15
University Research Conference: Advancing Sustainable Regions, 2007 (Sunshine Coast, Australia, 21-Nov-2007)
2007
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Abstract

Banking, Finance and Investment superannuation
One important artefact of compulsory superannuation saving is the tax concession. It is a by-product of the interaction between the flat tax regime of superannuation and the progressive taxation system that applies to salary and wages income. As a consequence, those on the lowest wages and salary scale receive the least amount of tax concession. However, this does not reconcile with stated government intention to reduce the future call on the pension. Based on treasury modelling, the need for retirement support would likely come from this same low income group who were also traditionally averse to superannuation saving. This research paper employs scenario analysis to predict the future value of the tax concessions for low, medium and high income earners. To this end, portfolios are constructed that mimic APRA's balanced fund asset allocation. Time series data from 1900 have then been used to estimate and forecast portfolio returns over a range of economic conditions. Ultimately, the study benchmarks the welfare-increasing potential that the current tax concessions offer against Adam Smith's economic theory. Smith said that to be deemed effective, a system of taxation needed to be equitable, efficient and transparent.

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