In the face of suggestions by some lobby groups and Government back-benchers that the retirement income system is unaffordable, the Association of Superannuation Funds of Australia (ASFA) has countered arguing the fiscal cost will “remain affordable and sustainable”.
In a submission filed with the Government’s Retirement Income Review, ASFA has asserted that Commonwealth expenditure on the Age Pension is expected to remain relatively stable, at low levels, over coming decades and will be contained due to higher superannuation account balances at retirement and the operation of the Age Pension means test.
“ASFA projects that expenditure on the Age Pension will fall from 2.9% to 2.6% of gross domestic product [GDP] over the period to 2054 to 55, assuming the superannuation guarantee [SG] rate is increased to 12%,” it said.
“This is consistent with the Australian Government’s own projections.”
The submission argued that for superannuation contributions, the concessional caps were working to limit total tax concessions, as was the additional tax charged on contributions made by individuals with income of $250,000 or more a year.
“The fiscal cost of tax concessions for superannuation contributions will remain stable at around 1% of GDP once the Superannuation Guarantee rate reaches 12%,” it said. “SG contributions make up the great bulk of concessionally-taxed contributions.”
“As the superannuation asset pool increases, the aggregate value of the tax concessions on investment earnings will increase somewhat. More assets – backing complying retirement incomes – will be tax free, but there will be a smaller proportion of assets in very high account balances due to the long‐term impact of contribution caps,” the ASFA submission said.
“Overall, the total cost of expenditure on the Age Pension and on tax concessions for superannuation are projected to rise, but only from 4.5% of GDP to around 5.1% of GDP. This is remarkable given the expected ageing of Australia’s population.”
“Government support for retirement incomes is affordable now and in the future.”