Capping super balances an option to stop ‘taxpayer-funded inheritance scheme’

Capping super balances is one option the government is considering to wind back the roughly $50 billion in superannuation tax concessions, Assistant Treasurer Stephen Jones says.

On Monday, Treasurer Jim Chalmers unveiled the government’s suggested wording for a definition of super that would restrict its use to retirement income. He also said the cost of tax concessions was in his sights before the May budget.

Assistant Treasurer Stephen Jones says the government is “clearly” thinking about caps on super tax concessions.Credit: Alex Ellinghausen

While the opposition seized on that as a broken promise, key Senate crossbenchers are open to backing a shake-up of super tax breaks.

Speaking on ABC News Breakfast, Jones said by 2050 the government will be paying more in super tax concessions than it is on the aged pension, which is the largest government welfare payment.

“We need to have a debate about it,” he said.

“If we all agree that the purpose of superannuation is to provide income in retirement, it beggars belief you could have $100 million in a superannuation account attracting very generous tax concessions.”

Jones said with balances of that size, those super accounts were clearly not just about retirement income.

“It’s about tax management, it’s about estate planning but not about retirement income. That’s an obvious place to look at,” he said.

When asked about the idea of capping superannuation balances at $2 million or $5 million, Jones said the government has not made a decision.

“We haven’t formed a view – a final view on that yet. I’m not going to say we’re not thinking about it, clearly we are,” he said.

The average superannuation balance is $150,000, Jones said. The Grattan Institute’s economic policy program director Brendan Coates said two-thirds of Australians have less than $100,000 in super, while about 80,000 people have more than $2 million in their accounts.

Coates said the tax breaks unfairly benefited the wealthy – with two-thirds of the value of the concessions going to the top 20 per cent of income earners.

“Super is becoming a taxpayer-funded inheritance scheme for wealthy Australians. And that’s clearly not what it is intended to be,” he said. “Most of the boost to balances from the tax breaks is never spent: one-third of all withdrawals from super by 2060 will be in the form of a bequest.”

Nationals senator Matt Canavan said any government move to alter super would be a broken promise after Anthony Albanese said before the election last year that Labor “had no intention of making any super changes”.

‘Super is becoming a taxpayer-funded inheritance scheme for wealthy Australians.’

Brendan Coates, Grattan Institute economic policy program director

“They said before the last election they wouldn’t mess with our super or tinker [with] it. People work hard for this money,” Canavan said on Nine’s Today show on Thursday.

Chalmers said the discussions about super tax breaks were not controversial, or a big shift in language.

“We need to make sure it’s sustainable. We need to make sure we can afford the various concessions into the future,” he said on ABC radio’s RN Breakfast.

“We inherited a trillion dollars of debt, we’ve got all these medium-term pressures on the budget intensifying rather than easing, and so one of the things that I’ve acknowledged this week, is that some of these tax concessions are expensive.”

Jones said the government was looking at what would be a reasonable amount of money for people to have in saving for their tax-assisted retirement income.

“Let me be very clear – this is not about the government saying to people [they] can’t save more than $5 million, $10 million, $100 million for their retirement,” he said.

“We’re saying, what is a reasonable contribution that the Australian taxpayer, through the budget, should be making to assist people to save for retirement incomes?”

Cut through the noise of federal politics with news, views and expert analysis from Jacqueline Maley. Subscribers can sign up to our weekly Inside Politics newsletter here.