Superannuation Tax Concessions and the Age Pension: A Principled Approach to Savings Taxation

Tax and Transfer Policy Institute - Working Paper 7/2015

64 Pages Posted: 3 Dec 2015

See all articles by David Ingles

David Ingles

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute

Miranda Stewart

University of Melbourne - Law School; Australian National University (ANU) - Crawford School of Public Policy

Date Written: November 1, 2015

Abstract

This paper discusses the tax and transfer treatment of private superannuation retirement saving and the public means tested age pension in Australia. Superannuation savings benefit from concessional treatment in Australia’s tax system by comparison with other forms of saving, measured against an income or consumption tax benchmark. In the drawdown phase, the age pension means test offsets this generous treatment for those in the middle but not at the top end of the distribution. However, it does so in a way that generates disincentives for work in retirement and, perversely, for saving, before and during retirement. We canvass a range of principled approaches that would provide support for saving across the life course while being more neutral and fair in both savings and drawdown phases. We conclude that a more coherent retirement tax and transfer system can be achieved by reducing tax concessions and making the age pension means test less harsh. In the long term, the tax and transfer treatment of retirement savings should be aligned with the treatment of savings in general.

Keywords: Income tax, consumption tax, superannuation, retirement incomes, age pension, means test, tax expenditures

Suggested Citation

Ingles, David and Stewart, Miranda, Superannuation Tax Concessions and the Age Pension: A Principled Approach to Savings Taxation (November 1, 2015). Tax and Transfer Policy Institute - Working Paper 7/2015, Available at SSRN: https://ssrn.com/abstract=2698454 or http://dx.doi.org/10.2139/ssrn.2698454

David Ingles (Contact Author)

Australian National University (ANU) - Crawford School of Public Policy - Tax and Transfer Policy Institute ( email )

ANU College of Asia and the Pacific
J.G. Crawford Building, #132, Lennox Crossing
Canberra, Australian Capital Territory 0200
Australia

Miranda Stewart

University of Melbourne - Law School ( email )

Melbourne, Victoria 3010
Australia
+61 3 8344 6544 (Phone)

Australian National University (ANU) - Crawford School of Public Policy ( email )

7 Liversidge Street
Lennox Crossing
Canberra, ACT 0200
Australia

HOME PAGE: http://https://crawford.anu.edu.au/people/academic/miranda-stewart

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