Superannuation and Tax—Some Equity Issues
| Author | Ann O'Connell |
| Published date | 01 September 2000 |
| Date | 01 September 2000 |
| DOI | 10.22145/flr.28.3.5 |
| Subject Matter | Article |
SUPERANNUATION AND
TAX-SOME
EQUITY
ISSUES
Ann
O'Connell*
1
INTRODUCTION
The
current
arrangements
for
taxation
of
superannuation
in
Australia
are
directed
to
ensuring
that
individuals
make
more
adequate
provision
for
their
retirement
than
has
occurred
in
the
past.
The
use
of
tax
concessions
to
do
this obviously
involves
a
cost
to
the
public
revenue.
The
use
of
tax
concessions
in
relation
to
superannuation
is
both
inefficient,
because
it
provides
concessions
to
those
who
would
make
provision
for
their
retirement
even
without
the
concessions,
and
inequitable,
because
it
provides
the
greatest
concessions
to
those
at
the
upper
end
of
the
income
scale.
Taxpayers
who
are
unlikely
to
access
the
concessions
fully
are those
who
do
not
follow
the
traditional
work
pattern
of
a
substantial
unbroken
period
of
employment.
The
aim
of
this
article
is
to
demonstrate
that,
at
the
turn
of
the
century,
many
women have
work patterns
that
differ from
the
traditional model
and that
the
current
arrangements
for
superannuation,
which
form
a
major
component
of
the
government's retirement
incomes
policy,
are
inequitable
and
should
be
changed.
The Federal
government's
retirement
incomes
policy
has
three elements.
Those
elements
are:
I
a
means-tested,
government-funded
age
pension,
payable
to
men
aged
65
years
and
over and
women
aged
61.5
years
and
over,
1
equivalent
to
approximately
one
quarter
of
the
average
male
wage;
2
a
compulsory
superannuation
system
with
employers
required
to
make
contributions
on behalf
of
employees
with
both
the
administration
of
the
system
and
investment
carried
out
in
the
private
sector;
and
3
a
voluntary
superannuation
savings
system
to
provide
additional
retirement
income
supported
by
tax
concessions.
This article
focuses
on
superannuation-the
second
and
third
elements.
government
policy
has,
for
many
years,
favoured
private
saving
for
retirement. Private
superannuation
arrangements protect
the
public
purse
from
the
impacts
of
an
aging
population.
It
has
also been
noted
that
private
superannuation
arrangements should
BA(Hons),
LLB
(Hons),
LLM
(Melb).
Senior
Lecturer
in Law,
University
of
Melbourne.
Special
Counsel,
Arthur
Robinson
and
Hedderwicks,
Solicitors.
1
The age
pension
qualifying
age
for
women
has progressively
increased
from
1
July
1995.
From
I
July
1997,
the
qualifying
age
for
women
has
been
increased
to
61
and
will increase
by
an additional
six
months
every
two
years
until
it
reaches
65
in
July
2013.
Federal Law
Review
ensure
a
higher living
standard
in
retirement
than
under
the
age
pension,
and
increased
private
savings
should
improve
national
economic
performance.
2
In
1995,
the
Senate
Select
Committee
on
Superannuation
released
its
report
on
Super
and
Broken
Work
Patterns.
The
report
concluded
that
"the taxation
arrangements
for
superannuation
disadvantage
those
on
low
incomes
who
are
most
likely
to
be
female
and either
part-time
or casual
employees"
3
and
made
a
number
of
recommendations.
In
1999,
the
government
responded
to
the
report,
agreeing
with
some
of
the
recommendations,
but
disagreeing
with
others.
The
government
response
does
not
specifically
refer
to
the position
of
women
but
does
agree
that
measures
should
be
taken
"to
redress
the
tax
imbalance
experienced
by
low
income
earners".
4
It
is
therefore
an
appropriate
time
to
consider the
position
of
women
in
relation
to
superannuation.
Clearly,
there
is
a
range
of
issues
affecting
women
in
relation
to
superannuation,
including
entitlement
to
superannuation
benefits
on
divorce,
5
lack
of
women
as
trustees
of
superannuation
funds
6
and
a
number
of
discriminatory
practices
in
the
operation
of
superannuation
funds.
7
However,
the
focus of
this
article
is
on
the
taxation
aspects
of
superannuation.
In
particular,
whether
the
tax
concessions
can
be
justified
and
whether
existing
arrangements
are
likely
to
leave
many
women
not
financially
prepared
for
retirement.
The
voluntary
superannuation
system
relies
on
direct
taxation
support.
This
takes
the
form
of
deductions and
rebates
(in
some
cases)
for
contributions
to
superannuation
funds,
lower rates
of
taxation
for
the
income
of
superannuation
funds and
concessional
rates
of
taxation
in
relation
to
the
payment
of
benefits
from
superannuation
funds
and
certain
other
termination
payments.
In
1992,
the
government introduced
a
system
of
compulsory
superannuation but
continued
to
offer
generous
tax
incentives.
The
compulsory
superannuation
system
relies
on
the
tax
system
in another
way.
That
is,
employers who
do
not provide
the
required minimum
levels
of
superannuation
contributions
for
employees
are
subject
to
a
tax
(called
a
"charge")
which
is
then
used
to
fund
the
required
superannuation
contribution
on
behalf
of
the
employees.
2 J
Disney,
Introduction
in
J
Disney
and
R
Krever
(eds),
Superannuation,
Savings
and
Taxation
(1996)
(Centre
for
International
and
Public
Law,
Australian
National
University
and
Taxation
Law
and
Policy Research
Institute,
Deakin University)
at
1.
3
Commonwealth Parliament,
Senate
Select
Committee
on
Superannuation,
Super
and
Broken
Work
Patterns
(1995)
para
5-15.
4
Government's response
to
Senate
Select
Committee's
15th
and
17th
reports,
25
March
1999.
5
The
government
released
a
position
paper
in
November,
1998
entitled
"Super
and
Family
Law"
and
has
now
promised
legislation
to
enable
splitting
of
superannuation
entitlements
on
divorce:
Joint Press
Release
by
the
Attorney-General
and
the
Minister
Assisting
the
Prime
Minister
for
the
Status
of
Women,
30
March,
1999.
For
a
discussion
of
the
difficulties
of
working
out
how
such
a
split
might
be effected,
see
J
Millbank,
"Hey
Girls,
Have
We
Got
a
Super
Deal
for
You:
Reform
of
Superannuation
and
Matrimonial
Property"
(1993)
7
Aus
Jo
of
Far
Law 104.
The
Family Law
Legislation
Amendment
(Superannuation)
Bill 2000
was
introduced
into
Parliament
on
13
April
2000,
but
had
not
been
passed
at
the
date
of
writing.
6
For
a
discussion
of
the
issues,
see
R
Clare,
"Women
and
Superannuation"
(1994)
64
Australian
Accountant
34.
7 J
Mattila,
"Women
and Retirement"
(1990) 15
LSB
41
and
E
Fletcher,
"Women
with
Famil-v
Responsibilities Need
Not
Apply"
(1996)
21
Alt
LJ
230.
Volume
28
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