SYDNEY – Australia‘s center-left government on Tuesday said it plans to scale back tax concessions for pension funds of the super rich, as it looks to plug a budget deficit gap and ease its rising debt pile.
Prime Minister Anthony Albanese’s Labor government, which came to power in May, aims to debate the curtailment of tax concessions once it legislates on the future of superannuation -or retirement funds.
Curtailment of tax concessions paid to people with multi-million-dollar superannuation accounts would raise billions of much-needed dollars annually for the government.
“We have 32 self-managed super funds with more than $100 million in assets – the largest self-managed super fund has over $400 million in assets,” Assistant Treasurer and Minister for Financial Services Stephen Jones said at the AFR Super & Wealth Summit in Sydney.
“The government celebrates success, but the concessional taxation of funds like these has a real cost to the budget,” he said.
The government said in its federal budget announcement last month that it sees its annual deficit widening to around A$50 billion ($32 billion) by the 2025/26 financial year, as commodity prices cool and spending pressures mount.
Debt is forecast to bulge to A$1.16 trillion by that year, equivalent to 43 percent of gross domestic product, due to the financial impact of the pandemic over the last two years.
Pension fund managers have benefited from a system of compulsory employer contribution introduced in the early 1990s. That has left funds flush with money to invest, but with limited domestic assets in which to invest.
Jones said providing a clear objective for super funds will enable the sector to identify opportunities where the national interest and member interests align.
The government last month said it had discussions with super funds to look at investing in affordable housing projects, to help fix a housing crisis.
“Superannuation funds have endorsed our Housing Accord and will work with us to leverage more investment that delivers for their investors’ and members’ interests, and for the national interest,” Jones said.