High income earners take biggest share of $100 billion of tax breaks

As speculation about changes to superannuation tax concessions for high net-worth individuals intensifies, the federal government's Tax Expenditures and Insights Statement released today shows some of the biggest tax breaks, including on superannuation earnings and contributions, capital gains, negative gearing and franking credits, are flowing disproportionately to those on above average incomes.

The statement shows that the top 10 tax breaks cost the budget more than $150 billion a year and around a third - $50 billion - comes from super tax discounts.

In a statement accompanying the release, Treasurer Jim Chalmers highlighted the uneven distribution of the super tax breaks but avoided committing to any changes in tax settings.

"The majority of these super tax breaks go to high income earners," Dr Chalmers said. "For instance, over 55 per cent of the benefit of superannuation tax breaks on earnings flow to the top 20 percent of income earners, with 39 per cent going to the top 10 per cent of income earners."

The Treasury statement provided the backdrop to the government's announcement that it plans to cap the 15 per cent tax concession on superannuation earnings at $3 million from mid-2025, with earnings on balances above that amount to be taxed at 30 per cent.

The change has drawn accusations from the Opposition that the government wants curb other tax expenditures such as negative gearing and franking credits.

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But Dr Chalmers denied any such plans and said the tax expenditures statement was a requirement under the Charter of Budget Honesty and "it's not a statement of policy or intent".

He couched its release in terms of the strains on the budget due in May.

"Since coming to office, the Albanese Government has been upfront and consistent about the challenges facing the economy and the budget," the treasurer said.

"As well as the cost of servicing a trillion dollars of debt, Australia also faces fast rising expenditure in areas such as health, the NDIS, aged care and defence."

According to Treasury analysis, capital gains tax discounts will be worth almost $23.7 billion this financial year and in 2019-20, 75 per cent of the benefit went to the top 10 per cent of income earners.

Similarly, almost 80 per cent of $18.6 billion claimed by landlords for negative gearing and other rental rental deductions went to those on above median incomes, including 35 per cent to the top 10 per cent of income earners.

High income earners were also major beneficiaries of franking credits. Of $17.2 billion claimed in 2019-20, 68 per cent went to those in the top 10 per cent wage bracket with an average value of $5490.

The distribution of some of the major tax concessions is skewed not only by income but also gender.

The Treasury report showed that women received significantly smaller shares of tax benefits. Of those benefiting from capital gains tax discounts, just 39 per cent were women. And because women have, on average, lower income, the benefit they derive from tax concessions on super contributions and earnings is commensurately smaller than men.

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