Super changes mean poor pay less, while rich pay more

Higher taxes for the rich and help for the poor are part of the changes to the superannuation system.

Low-income earners will pay no tax on their superannuation contributions while the wealthy will fork out more, as outlined in budget changes the federal government says will make the superannuation system fairer.

For 3.6 million low-income earners on less than $37,000 a year, the government will provide a low-income superannuation contribution of up to $500 each.

That would effectively refund the tax paid on their contributions, the government said in its budget papers.

High-income earners on more than $300,000 a year will have their tax concessions on their superannuation contributions cut from 30 per cent to 15 per cent.

The current system "provided wealthier Australians with greater concessions than low- and middle-income earners", the budget papers said.

The new system applying to high-income earners was in line with the concessions received by average-income earners, it said.

The Institute of Public Accountants (IPA) and Hall & Wilcox lawyers criticised the cut in concessions for high-income earners, saying that it diminished the incentive for Australians to save for their retirement.

"It means they will contribute less to super and they will have to look at other ways of investment such as negative gearing, which becomes more attractive," Hall & Wilcox partner Mark Payne said. "This measure is nothing more than a headline grab," he said of the proposed changes.

IPA chief executive Andrew Conway said confidence in the superannuation system was faltering with every successive Swan Budget, with nearly $2.5 billion in government savings in the 2012/13 budget coming from changes to the superannuation system.

The superannuation guarantee scheme will gradually increase from July 1, 2013, to 12 per cent of wages by 2019.

For a 30-year-old on average earnings today, the increase to 12 per cent (from 9 per cent at present) would result in an estimated additional retirement benefit of $117,600 by their retirement age.

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