Experts have criticised the federal budget for failing to address growing inequality in Australia's superannuation system, with generous tax concessions for high-income earners left untouched while average workers struggle to build adequate retirement savings.
Budget Misses Opportunity for Super Reform
The Albanese government's third budget, handed down in May, was widely expected to include measures to curb the cost of superannuation tax breaks, which are projected to reach $52 billion annually by 2026-27. However, no such changes were announced, disappointing many economists and retirement income advocates.
Tax Concessions Favour the Wealthy
Under current rules, contributions to superannuation are taxed at just 15%, compared to the top marginal income tax rate of 45%. This disproportionately benefits high-income earners who can afford to salary-sacrifice large amounts. The Grattan Institute estimates that the top 20% of earners receive about 60% of the tax benefits from super concessions.
According to the Australia Institute, a person earning $200,000 a year receives nearly $20,000 annually in super tax breaks, while someone on $50,000 gets only $1,500. Critics argue this undermines the system's purpose of providing retirement income for all Australians.
Stagnant Balances for Average Workers
While the wealthy accumulate large super balances, the average Australian's superannuation remains modest. The Association of Superannuation Funds of Australia (ASFA) says a comfortable retirement for a couple requires $640,000, but the median super balance for Australians aged 60-64 is just $211,000 for men and $146,000 for women.
Women are particularly disadvantaged due to career breaks and lower pay, resulting in a gender super gap of about 25% at retirement.
What the Budget Could Have Done
Economists suggest several reforms that could have been included:
- Capping the total amount that can be held in super at, say, $3 million, as proposed by the previous government but not legislated.
- Reducing the tax concession for contributions from high-income earners.
- Increasing the Super Guarantee rate faster than the scheduled rise to 12% by 2025.
- Providing government contributions for low-income earners, such as a super bonus for every dollar saved.
The budget did include a small measure to allow individuals to claim a tax deduction for personal super contributions if their employer contributions are less than the Super Guarantee, but this only benefits a narrow group.
Political Will Lacking
Reforming superannuation is politically difficult, as any changes are portrayed as a tax grab on retirement savings. The opposition has already attacked the government for considering caps, warning it would discourage saving.
However, without reform, the system will continue to deliver generous benefits to the wealthy while failing to ensure adequate retirement incomes for many Australians. The budget missed a golden opportunity to make the system fairer and more sustainable.
