"Tax breaks enjoyed by mainly wealthy superannuation account holders are costing the federal budget $6 billion a year in lost revenue, independent analysis shows.
The true extent of the damage to tax receipts by a system which allows tax-free earnings for those over 60 is revealed in research by the Parliamentary Budget Office.
It found that the refund of franking credits on share dividends – which has resulted in people with millions of dollars in self-managed super receiving cash cheques from the Australian Taxation Office at the end of the year – are a net negative on tax receipts."
"Superannuation assets are expected to grow from $1.9 trillion to $6 trillion by 2030, meaning the cash leaking out of the budget due to dividend imputation will also rise dramatically unless addressed."
"The dividend imputation system, which gives refunds to domestic shareholders on tax paid by companies and costs the federal budget $6 billion a year in lost revenue, should be reviewed because of Australia’s place in a global capital market and the potentially unintended consequences of the compulsory superannuation system and the zero-tax status of retirees, Mr Dunn said.
For example, retirees who have been able to save for their own retirement pay zero pay on their retirement income, which means franking credits from shares are not offsetting their own personal income tax bill but instead providing a income stream in its own right."
