Revenue Review is against the practice of taxing superannuation before a significant accumulation is achieved. Accordingly, we propose the abolition of taxation on superannuation contributions and earnings.

We believe that it is not necessary to increase the compulsory employer contribution rate, if the tax on Superannuation contributions and earnings is abolished. While this option is supported by many commenators, employees would assumedly be earning less in take-home wages if there was an increase in the compulsory contribution.

The following table illustrates the way in which taxation on Superannuation inhibits the accumulation of member’s funds over time.

This example is based upon a $100,000 wage earner – with a $9,000 yearly contribution. We have used a 10% rate of earnings for simplicity. Naturally, the present 15% contribution tax reduces the $9,000 principal to $7,650 and the 15% tax on earnings means that the 10% compound rate is, in fact, just 8.5%.

Contribution rate $9000 @ 10% $7,650 @ 8.5% Difference %
10 Year 156719 123135 33584 27
15 Year 312839 234335 78504 34
20 Year 564270 401541 162729 41
25 Year 969204 652962 316242 48
30 Year 1621352 1031013 590339 57


It stands to reason, therefore, that medium income earners will retire with superannuation at an average of at least 35% higher if there is no tax on their fund.

The superannuation industry holds in excess of $1.2 billion in deposits according to recent estimates.

The taxes currently raised are in the vicinity of $9.75 billion. This revenue can easily be restructured and gathered from large accounts at the uniform rate of 30% thus leaving the medium and low income worker more self reliant. This will essentially benefit all workers (including high income earners) and will reduce the opportunity for superannuation to be used purely as a tax shelter.

For Revenue Review's submission to the AFTS Retirement Income Review: Click Here