Exclusive: The powerful industry lobby says the super system unfairly benefits high-income earners and men

This article is more than 7 months old

This article is more than 7 months old

Tax concessions for superannuation that overwhelmingly favour the rich need to be overhauled, the powerful industry super fund lobby has told Treasury.

In a submission to a review of the super system being conducted by the department, peak body Industry Super Australia says the imbalance also means men get an outsized share of super tax breaks.

ISA said a person earning more than $124,000 a year – putting them in the top 10% of taxpayers – gets an average tax advantage on their contributions to super of $3,677 a year, 75 times the $49 a year reaped by someone on $22,000.

The body, which represents funds run by employers and unions to benefit members, said the gender gap exploded from age 35, when women often take time off work to have children.

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“It is clear that the equity and efficiency of government supports, including tax concessions, need to be considered to ensure the supports are being appropriately targeted at those that need it the most – not the least,” ISA chief executive Bernie Dean said.

“Entrenched inequities must be examined as part of the retirement income review, otherwise we will continue to see women retire with about half the amount of super than men, and low-income earners retire with persistently low super balances.”

ISA’s submission represents an attack on a report released by the Grattan Institute in July last year, in which the thinktank said the current 9% super contribution rate was adequate and urged the government to abandon its policy of increasing the rate to 12% by 2025.

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However, Grattan’s model assumes retirement savers work for an uninterrupted 30 years.

ISA said its research showed that men of retirement age on average spent 12 years more in the workforce than women, who spent more time working part-time or out of the workforce bringing up kids.

Together with lower wages for women due to the gender pay gap, this means that women quickly fall behind men when saving for their retirement, ISA said.

Men between 30 and 34 have an average super balance of $45,800, 15% more than the $38,886 held by women, according to ISA research.

As people near retirement age, at 60 to 64, the gap blows out to almost 30%, with men holding an average of more than $188,000 in super against the $133,000 average balance held by women.

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“Clearly, superannuation balances benefit from compound earnings over a full career and the gender super gap from career breaks can persist even if the pay gap is subsequently reduced,” ISA said in its submission.

It told Treasury the minimum pay level of $450 a month before super is paid should be abolished, super should be paid on parental leave and tax offsets should be adjusted to help low-income earners.

Treasurer Josh Frydenberg announced the retirement income review in September, following a recommendation from the Productivity Commission.

Run by a panel headed by former senior public servant Michael Callaghan, it is examining what Frydenberg called the “three pillars” of Australia’s retirement income system – the pension, super and savings including the family home.

The review comes amid heavy debate over the value of super to some groups of people, especially young people who end up with their savings spread across a number of low-balance accounts, and close scrutiny of under-performing funds by the prudential regulator following the Hayne royal commission.

A final report is due in June.