The effects of superannuation tax concessions on private savings

Key researchers

Project background and aims

This report examines empirical evidence on the impact of the superannuation tax concessions on voluntary private savings in Australia. We find that among the many instruments the uses to encourage savings in superannuation, the government co-contribution to superannuation for low and middle-income earners has an insignificant impact on private household saving. We also find that the concessional contributions cap has marginal impacts on household saving and wealth and households who pay the Division 293 tax have 12.7 per cent less private savings than those who are not liable for paying the tax. Our results show that superannuation tax concessions do not have any significant negative effect on household savings in Australia. As a whole, the tax policies seem to improve household superannuation balances to some extent, and not at the expense of other non-super wealth. Hence, new wealth is generated. However, the impact on wealth is marginal. This study was part of the work commissioned for the Retirement Income Review by The Treasury.