Higher earners will stash more money into superannuation to reduce their taxable income when Labor ’s reworked income tax cuts start in July, experts say, with analysis showing the changes will entrench super tax breaks for the financially better off.
“We’re doing a fair bit of modelling for clients, and people are definitely exploring opportunities on what they can do , particularly as they get close to retirement,” he said. This could motivate high-income earners to put more money into super, potentially increasing the gulf between Australia’s biggest retirement savers and low- and middle-income earners.“As people move up income scales and tax rates, they start thinking ‘what can I do to reduce the tax rate I face’ … and one of the things you can do is put more money into super,” he said.
Those earning above this amount will be taxed between 37 per cent and 45 per cent, increasing the relative benefit of putting more money into super where it will instead attract a 15 per cent rate. “If you’re worried about fairness in Australia, you’d note that the superannuation guarantee is going up in three months and the super concessions vie for the title of the least fair tax in the country,” he said.
The Grattan Institute’s deputy economic policy director, Joey Moloney, agreed that the changes to stage three increased the value of super tax breaks for high-income earners, but “the case for reforming was already rock solid under the original stage three plan”.
Higher Earners Superannuation Taxable Income Income Tax Cuts Labor Tax Relief Tax Breaks Analysis Financial Attractiveness Tax-Effective Structures
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