distributional analysis of superannuation taxation concessions april 2012.doc

7/29/2019 Distributional analysis of superannuation taxation concessions April 2012.doc

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Superannuation Roundtable 23 April 2012

Distributional analysis of superannuation taxation

concessions

This paper presents Treasury analysis on the distribution of superannuation taxation

concessions.

Superannuation is taxed concessionally

While personal income is generally taxed at individuals marginal tax rates,superannuation is taxed concessionally to support and encourage individuals to savefor retirement:

Contributions phase contributions are taxed at a flat rate of 15 per cent in thefund. This will generally be concessional compared with higher individual marginal

tax rates see Table 1.

Accumulation phase investment earnings are taxed at a flat 15 per cent (can be10% for capital gains) which will be concessional compared with higher individualmarginal rates.

Retirement phase investment earnings (including capital gains) can be taxexempt taxed at 0 per cent if they are from assets supporting superannuationpensions. Superannuation payments to individual members will generally be taxfree where members are 60 or over.

Table 1: Comparison of superannuation taxation and personal income taxation 2012-

13

Income MarginalPersonalTax Rate

Super contributionsand investment

earnings inaccumulation phase

Investmentearnings in

pensionphase

Benefitpaymentsin taxed

funds

$0 - $18,200 0% 15% (capital gains canbe 10%)

0% 0%

$18,201 -

$37,000

19% 15% (capital gains can

be 10%)

0% 0%

$37,001 -$80,000

32.5% 15% (capital gains canbe 10%)

0% 0%

$80,001 -$180,000

37% 15% (capital gains canbe 10%)

0% 0%

$180,001 andabove

45% 15% (capital gains canbe 10%)

0% 0%

Value of tax concessions

The 2011 Tax Expenditure Statement estimates tax concessions on superannuation atapproximately $32 billion in 2012-13. This is the second largest tax expenditure.

Concessions on contributions are estimated at $16.5 billion and on superannuation

earnings at $15.5 billion.


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Distribution of tax concessions

The following two tables analyse the distribution of superannuation tax concessions.

The first table uses actual 2009-10 data to estimate concessions on contributions and

earnings.

The second table is estimates of the concessions on contributions in 2012-13.


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The share of concessions increases as you move up the income scale.

It is estimated that in 2012-13 the top 5 per cent of contributors will receive 20.3%

of contribution concessions. The top 1 per cent will receive 5.3% of contribution

concessions. (Refer Table 3)

Higher income earners also receive more of the earnings tax concessions (refer

Table 2)

Table 2: Actual distribution of superannuation tax concessions 2009-10

2009-10 Taxable

Income

Taxable

Income cuts

in after: ($)

Average

Contribution

($)

Average

superannuation

balance

Mean

contribution

concession ($)

Mean earnings

concession ($)

Total earnings

and

contribution

concessions

($bn)

Share of

contribution

concessions

(%)

Share of total

concessions

(%)

First decile 0 1,400 47,500 -100 -100 -0.3 -0.9 -1.2

Second decile 13,700 2,000 38,700 100 100 0.2 0.7 0.9

Third decile 21,400 3,000 41,800 100 200 0.3 1.1 1.5

Fourth decile 29,000 4,100 48,700 600 400 1.0 4.6 4.6

Fifth decile 35,700 4,600 48,600 900 600 1.6 7.7 7.2

Sixth decile 42,400 5,400 53,900 1,100 700 1.8 9.0 8.3

Seventh decile 50,200 6,400 66,000 1,300 800 2.1 10.5 9.8

Eighth decile 59,700 7,900 84,100 1,400 1,000 2.4 11.8 11.2

Ninth decile 72,900 10,300 125,800 2,400 1,800 4.2 19.5 19.5

Top decile 94,800 17,200 226,900 4,500 3,900 8.3 36.1 38.2

Top five per cent 124,200 21,300 300,900 5,800 5,400 5.623.4 25.7

Top one per cent 241,400 30,100 552,000 8,600 10,600 2.0 7.1 9.0

All 6,200 77,800 1,200 900 21.7 100.0 100.0

Table 3: Forecast distribution of contributions concessions 2012-13

2012-13 Taxable Income Taxable

Income cuts

in after: ($)

Average

Contribution

Mean

contribution

concession

($)

Total

Contribution

concessions

($bn)

Share of

contribution

concessions

(%)

First decile -700 1,300 0 0.0 -0.2

Second decile 15,100 2,100 200 0.2 1.6

Third decile 23,700 3,100 500 0.5 3.6

Fourth decile 31,800 4,200 900 1.0 6.4

Fifth decile 39,200 5,000 1,000 1.1 7.3

Sixth decile 46,500 5,800 1,200 1.3 8.5

Seventh decile 55,200 7,000 1,400 1.5 10.1

Eighth decile 66,200 8,600 1,800 1.9 12.9

Ninth decile 82,800 10,800 2,500 2.7 18.0

Top decile 108,900 17,300 4,500 4.8 31.8

Top 5 pct 143,900 20,600 5,700 3.0 20.3

Top percentile 294,900 26,200 7,300 0.8 5.3

All 6,500 1,400 14.9


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Change in distribution of contribution concessions since 2007

Figure 1 shows the change in distribution of concessions since 2007:

An increase in concessions for low income earners from the low income

superannuation contribution.

Concessions for higher income earners decreased after the reduction in the

contribution caps.

Figure1: Change in distribution of contribution concessions since 2007.

6.5

45.2

31.6

16.7

4.6

47.5

35.5

12.59.3

38.4 38.5

13.8

0

5

10

15

20

25

30

35

40

45

50

Bottom tax brackets 3rd tax bracket 4th tax bracket Top tax bracket

Per cent

2007-08 2009-10 2012-13

Level of support provided by age pension and

superannuation combined

Figure 2 adds age pension support to the support provided by taxation concessions:

Age pension support is highest for lower income earners and superannuation tax

concession support is higher for higher income earners.

Total combined support starts to increase clearly for the top 10% of income

earners;

The top 1% of income earners receive the most combined support.

Figure 2 Distribution of total government support (both superannuation tax

concessions and Age Pension)


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distributional analysis of superannuation taxation concessions april 2012.doc

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