The Financial Services Council (FSC) has sought to put an end to Federal Treasury suggestions that Australia's superannuation tax concessions are unsustainable.
The FSC has used its pre-Budget submission to not only argue that the Government should accept the validity of the tax concessions granted to superannuation but that it should be something which is included in the forthcoming Tax White Paper.
The submission states bluntly that the Government [should] "recognise that a tax concession is a necessary precondition to requiring employees to contribute to their superannuation from their income and boosts national savings by encouraging Australians to save for their retirement".
"The fiscal impact of tax concessions afforded to superannuation earnings and contributions in the Budget do not take into account the reduced expenditure on the age pension, or other age-related health care costs, which results from more people becoming self-funded retirees," it said. "By definition, the superannuation system is needed to meet these long-term costs. Australians would not otherwise adequately save for their own retirement."
The FSC submission has confronted the Treasury head-on suggesting that the department's Tax Expenditures Statement is misleading in classifying the taxation of superannuation entity earnings as a ‘concession'.
"Without compulsory superannuation Australians would change their behaviour and the $1.7 trillion in retirement savings would be spent and invested elsewhere," it said.
"The Tax Expenditures Statement assumption that behaviour would not change, which is the basis of the revenue cost, is highly improbable. Instead, it is far more likely that, in lieu of superannuation existing, a significant portion of the revenue would be ‘lost' as individuals would ‘save' via the tax free family home, or spend a portion of their income on the 40 per cent of goods and services that escape the GST, reducing the overall size of the taxable pool of national savings."
