But because of the way division 293 tax is calculated, the effects of an $180,000 threshold would creep beyond high-income earners, the researchers add.
“We therefore conclude that a threshold of $200,000 would be most appropriate and in line with the proposed objective of superannuation.”
Super contributions are usually taxed at 15 per cent. The 30 per cent division 293 tax was introduced in 2012 at a threshold of $300,000, which was reduced to $250,000 on July 1, 2017.
In the 2015-16 tax year, the latest figures available, it raised $475 million.
Strike a balance
Former Fair Work commissioner Graeme Watson in November lost a bid to avoid $30,000 in division 293 tax. He unsuccessfully argued that he had the rank of a Federal Court judge and therefore shouldn’t have to pay.
As the journal article notes, super tax concessions should strike the right balance between encouraging people to save for retirement and excessive generosity at the top of the income scale.
The work represents the first analysis of the effect of different thresholds on average taxpayers in various income tax brackets.
Setting division 293 threshold at $180,000 instead of $200,000 would erode by $2522 the average net concessions of somebody earning between $180,001 and $200,000, for example.
At a threshold of $200,000 the same taxpayer would lose $1475.
“Taxpayers with incomes of over $180,000 are considered ‘high income’ by the marginal tax rates, and the superannuation system should reflect this too,” the article says.
“Therefore it is arguable that the division 293 tax applied at this threshold reduces unnecessary tax concessions as it applies to all high income taxpayers.”
However, a $180,000 threshold may be a bridge too far in the eyes of some, the researchers add. This is because calculation of division 293 tax is based on a stricter income definition than the one used to determine income tax; it does not allow people to use techniques such as negative gearing to come in below the threshold.
Some taxpayers are therefore subject to division 293 tax even though their income falls below whatever threshold is set. Ergo, a threshold of $180,000 would capture some taxpayers not considered to be high-income earners.
Labor says lowering the division 293 threshold will mean that somebody earning $200,000 gets the same level of concession as somebody earning $80,000.