As debate rages about the federal government’s plan to lift the tax on earnings on superannuation balances over $3 million, it’s worth revisiting why we offer super tax breaks in the first place, and why they need to be reformed.

Tax breaks on super contributions mean less tax is paid on super savings than other forms of income. These tax breaks cost the federal budget nearly $50 billion in lost revenue each year.

These tax breaks boost the retirement savings of super fund members. They also ensure workers don’t pay punitively high long-term tax rates on their super, since the impact of even low tax rates on savings compounds over time.

But they disproportionately flow to older and wealthier Australians.

Two-thirds of the value of super tax breaks benefit the top 20 per cent of income-earners, who are already saving enough for their retirement.

Few retirees draw down on their retirement savings as intended, and many are net savers – their super balance continues to grow for decades after they retire.

By 2060, Treasury expects one-third of all withdrawals from super will be via bequests – up from one-fifth today.

Superannuation in Australia was intended to help fund retirements. Instead, it has become a taxpayer-subsidised inheritance scheme.

The tax breaks aren’t just inequitable; they are economically unsound. Generous tax breaks for super........

© The New Daily