Superannuation tax concessions are costing the budget $50bn a year, with almost 40% of the benefit of tax breaks on earnings flowing to the top 10% of income earners.
That is one of the central findings of the tax expenditures and income statement, released by the treasurer, Jim Chalmers, on Tuesday.
The statement, which measures tax concessions, credits and deductions, also reveals men are receiving on average almost $1,000 more a year in super tax concessions than women.
The statement was released shortly before Chalmers and prime minister Anthony Albanese announced on Tuesday that their government will move to tax superannuation balances above $3m at a higher rate as it looks for opportunities to claw back revenue.
The changes will apply to around 80,000 people with balances above $3m in their accounts.
Of the 10 biggest tax expenditures, which are worth more than $150bn annually, around a third is made up of superannuation tax discounts.
While underscoring the case to change super tax settings, the report also confirms some of the biggest holes in the budget are caused by concessions that Labor has vowed not to change in this term, including capital gains tax.
The Albanese government has decided to legislate an objective for superannuation, including that it should be “sustainable and equitable”, starting a public debate about whether it should curb tax concessions, particularly for the 1% of accounts with balances of $3m or more.
On Tuesday morning, Chalmers said the statement, which includes distributional analysis by age, gender and income, would provide “greater transparency” and “help increase public awareness and inform debate about the fairness and efficiency of the tax system”.
The statement shows in 2022-23 concessions on contributions to superannuation cost $23.3bn, with a further $21.5bn reduction in revenue due to concessions on the earnings of savings in super accounts.
The statement reveals that more than 55% of the benefit of superannuation tax breaks on earnings flow to the top 20% of income earners, with 39% going to the top 10% of income earners.
Due to having larger super balances on average, men received 61% of the share of this concession, compared with 39% for women. Men received an average benefit of $1,100 while women got just $750.
Some 46% of the benefit of the earnings concession went to those aged 60 or over, due to their higher super balances and the 0% tax rate applied to earnings in the retirement phase.
The tax benefits of superannuation contributions also flowed disproportionately to high-income earners, with the top income decile – those earning more than $121,000 – receiving 30% of the benefit. Men received an average benefit of $1,950 compared to $1,390 for women.
The Albanese government has rejected suggestions that curbing super tax concessions on large balances would breach its election commitment against “major” changes to the retirement savings system.
After losing the 2019 election promising a broader crackdown on tax concessions including negative gearing, capital gains tax concessions and excess franking credits for those not paying tax, Labor abandoned these policies ahead of the 2022 poll.
Capital gains tax concessions for a main residence cost $48bn in 2022-23 and rental deductions cost $24.4bn. In 2019-20 taxpayers reported total rental losses of $10.2bn, delivering them a $3.6bn tax benefit.
Other big ticket items include the $23.7bn capital gains tax concession for individuals and trusts holding assets for more than 12 months.
The statement found that of the 3.1 million people claiming the benefit of $17.2bn of franking credits, 68% went to people in the top taxable income decile.
More than a third (35%) of the benefit of rental deductions – which includes rental losses, interest costs, property maintenance and council rates – went to people in the top taxable income decile.
The statement reveals that among the fastest-growing tax concessions is the $8bn exemption from income tax on amounts paid to National Disability Insurance Scheme recipients, which is set to grow by 19% over four years.
Chalmers said “since coming to office, the Albanese government has been upfront and consistent about the challenges facing the economy and the budget”.
“As well as the cost of servicing a trillion dollars of debt, Australia also faces fast-rising expenditure in areas such as health, the NDIS, aged care and defence.
“We have begun the hard yards of repairing the nation’s finances.”
Chalmers said the upcoming May budget would maintain a “responsible and sensible” approach.
Since unveiling its proposed purpose for superannuation earlier in February, the Coalition has accused Labor of breaching its election commitment and vowed to vote against an attempt to curb tax breaks. Several independent MPs have also raised concerns.
But Liberal moderates Russell Broadbent and Bridget Archer have broken ranks and endorsed a debate about super tax concessions, while crossbench senators including independent David Pocock have suggested they could support the plan.
