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Thursday, 26 March 1987
Page: 1390


Senator GILES —My question is to the Minister representing the Treasurer. What is the cost to revenue of the present system of tax concessions for superannuation? What would be the effect of abolishing the 1983 lump sum tax and abolishing the pension assets test on the rationale justifying the superannuation tax concessions?


Senator WALSH —The costs to revenue of the superannuation tax concessions, which appear in various forms, were estimated for the 1985-86 financial year to be $3,140m. They were published in the October 1986 tax expenditure statement from Treasury. The prime reason for providing those concessions, which have a high revenue cost, is to encourage Australians to make genuine provision-and this has been the prime reason or rationale for the concessions for as long as they have existed-for their post-retirement years on the grounds that if that genuine provision is made, there will be an off-setting-a significant if not total offsetting-saving in future age pension expenditures, provided that such age pensions are properly means tested.

The second part of Senator Giles's question concerned the effect of abolishing the 1983 lump sum superannuation tax and abolishing the pension assets test as the rationale for justifying the tax concessions. The effect of abolishing the tax on lump sum superannuation would be to encourage Australians to use superannuation as a device for deferring wages and receiving wages tax free instead of a device to provide income for themselves in their post-retirement years. The effect of abolishing the assets test would be to encourage people to put their wealth into assets, such as collectables and perhaps real estate, which yield a capital gain rather than income, and draw a pension at the same time. The cost of doing that is, I believe, a good deal more than the official estimates of the Department of Social Security and, I believe, for these reasons: In the eight years to 1983, the people in receipt of pensions as a proportion of the total population of pensionable age remained pretty constant, but since 1983 that proportion has fallen from 84.5 to 78.5 per cent. If the 84.5 figure had been maintained, an extra 123,000 people would be in receipt of pensions, which would have cost the Budget $580m.

Returning to the rationale for the existence of those very generous concessions, I note with considerable interest that the Australian Mutual Provident Society has recently circulated a discussion paper on this question. I quote two extracts from it. It states:

Any move to relax means testing on pensions, or to introduce a universal age pension, would weaken the arguments in favour of tax concessions for superannuation.

In the final sentence, it says:

It also follows that those who seek to retain the concessions should in their own interests give strong support to all legislative changes which are aimed at preventing double dipping of any kind.

In other words, the AMP Society is saying that those who seek to retain the tax concessions should give strong support to preventing double dipping, that is, making sure that a tax on superannuation payments taken as a lump sum remains in place and, more importantly, that there be an assets test on pensions. I welcome the AMP's support of government policy on that question and its implicit repudiation of the irresponsible and inequitable undertakings being given by the present Leader of the Opposition to open up the system for widespread avoidance of tax on wages through disguising wages as superannuation and, likewise, opening up the welfare system to double dipping by abolishing the assets test.