Super catch up contributions: how the rich get richer

Super catch up contributions: how the rich get richer
About this post

A recently published report by the Grattan Institute into Australian super contributions has found that tax breaks designed to assist people with broken work histories are in fact mostly being taken advantage of by top income earners.

The tax break feature of the super system was designed to help those who were most likely to fall behind in super contributions, particularly women who take maternity leave. However, as the “Super Tax Targeting” report shows, it is not the intended middle-income earners who are making these contributions or in fact women at all. Pre-tax contributions are most likely to come from top income earning males and, as a result of this and other tax breaks, $25 billion dollars of government revenue is lost a year.

“Our analysis shows that more than half the benefit of current superannuation tax breaks flows to the wealthiest 20 per cent of households who already have enough resources to fund their own retirement ,” says Grattan Institute CEO John Daley.

“In tight budgetary times, these costs are unsustainable and must be reined in.”

It’s a similar story when it comes to post-tax contributions with around half of these voluntary contributions coming from people who already have at least $500,000 in their superannuation fund. By contrast the 70% of people with super balances of less than $100,000 make just 9 per cent of total post-tax contributions.

To combat this trend the Grattan Institute has suggested three main reforms to the super system to assist in making sure that tax breaks best serve the goals of superannuation. Firstly, contributions from pre-tax income should be limited to $11,000 a year. Secondly, lifetime contributions from post-tax income should be limited to $250,000. Finally, earnings in retirement – currently untaxed – should be taxed at 15 per cent, the same as superannuation earnings before retirement.

With Australia’s ageing population and a growing number of retirees, young people and low-income earners are the hardest hit by the current system as they are taxed more to make up for retirees living tax-free. The reforms suggested are bold but could be beneficial in protecting these financially vulnerable groups from high tax rates in the future.  

“Previous repeated changes to superannuation have been too timid. A wide gap remains between the goals of the system and what it actually delivers,” Mr Daley says.

“Decisive reform must target super tax breaks at those who need them most.”


This is an information service. By browsing on the website and/or using our search tools, you are asking RateCity to provide you with information about products from multiple financial institutions. We will try to show you a range of products in response to your request for information. The search results do not include all providers and may not compare all features relevant to you, for further details refer to our FSCG. The rating shown is only one factor to take into account when considering these products. For superannuation products, see the rating methodology. We are not a credit provider, and in giving you product information we are not making any suggestion or recommendation to you about a particular credit product. If you decide to apply for a product, you will deal directly with a financial institution, and not with RateCity. Rates and product information should be confirmed with the relevant financial institution, and you should review the PDS before you decide to purchase. See our terms of use for further details. This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you. This information service uses data and research provided by SuperRatings (ASFL: 311800), which provides general information on superannuation. Read more about SuperRatings’ information service and how their ratings work. As with all investments, past performance is not a reliable indicator of future performance.