Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 98

Treasury says don’t use the $32 billion number

If you enter ‘superannuation $32 billion’ into Google, you receive about 18,000 responses. The $32 billion number has become the most dangerous weapon used by critics of super tax concessions. For example, in ABC’s The Drum, it says:

“The cost to revenue of the concessional treatment of superannuation reached $32 billion this year. That is almost 50 per cent more than the Defence budget and $2.3 billion above Commonwealth spending on education.

Treasury projects that the figure will jump to $45 billion by 2015-16, by which time it will overtake the cost of the age pension. So where is the sense of outrage about this budget-blowing, out-of-control 41 per cent increase in government spending, making it the fastest growing major area of government?”

It is important to know what this number means, as it is often used as a budget example of how the Government could make savings for other purposes.

At the SMSF Association Conference on 19 February 2015, Rob Hefernen, Executive Director Revenue Group, The Treasury spoke at a session with industry regulators called, ‘The evolution – Superannuation as the leader in the wealth industry’. This talk has not been posted on The Treasury website.

“I’m a bit of an imposter as The Treasury is not strictly a regulator, we’re a policy adviser to the Treasurer and Assistant Treasurer, and on broader economic policy to the Government as a whole. One thing John Fraser (the new Treasury Secretary) is very keen on is that senior staff should have a much better understanding of how business and private sector make decisions, which is why we welcome these sessions.

The superannuation system is growing at an extraordinarily rapid rate, with SMSF growth outstripping the overall system. In 1996, at the time of the Wallis Inquiry, superannuation assets totalled $245 billion or about 38% of Australia’s GDP. Today it is over $1.85 billion, greater than the GDP. SMSFs are now 35% of all super assets, a massive growth. This growth is something that policy advisors and regulators need to understand. We need to understand the drivers, and what it means for the economy. Clearly a vehicle for people who want a direct say in their own retirement savings must be something that people value highly. The idea of people taking responsibility for their own savings and having the highest quality of life in retirement is a good thing and should warrant appropriate government support.

There was a fair amount of comment in the Financial Systems Inquiry about the objectives of superannuation. It’s fair to say the objectives are sometimes not fully understood. From the Inquiry’s point of view, to provide income in retirement and increase the quality of life is a key objective. Some people might quibble about the effect on the aged pension and we’ll see more discussion on that.

I do want to address our Tax Expenditure Statement (TES). It is part of the Charter of Budget Honesty. Let’s be clear: there are some things that the TES is, and there are some things the TES is not. It is not a document with a policy message. When it is reported in the press - God bless them - there seems to be an inference that simply because there is a large measured tax expenditure, the Government should do something about it. That is not the case. There is no policy message whatsoever in the Tax Expenditure Statement.

What it is meant to be is a benchmark or measure of the amount of money potentially foregone. If I could just bore people for a second, if you think about the aged pension. This costs about $20 billion a year, the measured outlay. No one would say if the aged pension was repealed – not that this would happen – would you get a $20 billion saving. People would go onto NewStart, they might go back into the labour force, they might go onto a Disability Support Pension. All it is the amount of the pension multiplied by the number of people who receive it.

Does it take into account behavioural change? No, it doesn’t. When people report things that say this is a measure of tax expenditure, and therefore that’s the amount the Government could save if they did something about it, that is untrue. We do attempt to do a revenue gain estimate and the TES is extremely qualified on revenue gain. It actually says:

“The revenue gain estimate should be treated with particular caution - (which is code for ‘beware’) -  there is usually little, if any, information on how taxpayers might react to the removal of a tax expenditure. Assumptions about taxpayer behavioural responses therefore need to be made, and these assumptions can be difficult to meaningfully substantiate.”

We really don’t know. Going through that, you might ask, ‘Why on earth would you do it?’ Well, on page 5 of the TES:

“Consistent with a recommendation of the Australian National Audit Office in its 2007-08 performance audit of the TES, the TES reports revenue gain estimates for 10 large tax expenditures.”

We are asked to do an audit, so we do. But be wary on the revenue gain estimates. Don’t use them, they are too unreliable. On the revenue foregone, done according to international best practice, that is not a measure of what is saved. Anyone who says this is not reading the fine print – it’s not even fine print, it’s in bold print. Every year when we put it out, we get criticism, so I wanted to make it clear.”

In response, Andrea Slattery (CEO of the SMSF Association) said:

“Can I just confirm then that the $32 billion that the Government could save on superannuation and then spend somewhere else if it got rid of tax concessions, they will not get all $32 billion?”

To which Rob replied:

“I don’t even think you need a document to confirm that.”


Graham Hand attended the Conference as a guest of the SMSF Association. The bold emphasis in the text is his highlighting, not the speaker’s.


What exactly is the ATO’s role in SMSFs?

Minister Jane Hume on SMSFs and superannuation reform

YourSuper will save $17.9 billion! Surely you’re joshing


Most viewed in recent weeks

How to enjoy your retirement

Amid thousands of comments, tips include developing interests to keep occupied, planning in advance to have enough money, staying connected with friends and communities ... should you defer retirement or just do it?

Results from our retirement experiences survey

Retirement is a good experience if you plan for it and manage your time, but freedom from money worries is key. Many retirees enjoy managing their money but SMSFs are not for everyone. Each retirement is different.

A tonic for turbulent times: my nine tips for investing

Investing is often portrayed as unapproachably complex. Can it be distilled into nine tips? An economist with 35 years of experience through numerous market cycles and events has given it a shot.

Rival standard for savings and incomes in retirement

A new standard argues the majority of Australians will never achieve the ASFA 'comfortable' level of retirement savings and it amounts to 'fearmongering' by vested interests. If comfortable is aspirational, so be it.

Dalio v Marks is common sense v uncommon sense

Billionaire fund manager standoff: Ray Dalio thinks investing is common sense and markets are simple, while Howard Marks says complex and convoluted 'second-level' thinking is needed for superior returns.

Fear is good if you are not part of the herd

If you feel fear when the market loses its head, you become part of the herd. Develop habits to embrace the fear. Identify the cause, decide if you need to take action and own the result without looking back. 

Latest Updates


The paradox of investment cycles

Now we're captivated by inflation and higher rates but only a year ago, investors were certain of the supremacy of US companies, the benign nature of inflation and the remoteness of tighter monetary policy.


Reporting Season will show cost control and pricing power

Companies have been slow to update guidance and we have yet to see the impact of inflation expectations in earnings and outlooks. Companies need to insulate costs from inflation while enjoying an uptick in revenue.


The early signals for August company earnings

Weaker share prices may have already discounted some bad news, but cost inflation is creating wide divergences inside and across sectors. Early results show some companies are strong enough to resist sector falls.


The compelling 20-year flight of SYD into private hands

In 2002, the share price of the company that became Sydney Airport (SYD) hit 80 cents from the $2 IPO price. After 20 years of astute investment driving revenue increases, it sold to private hands for $8.75 in 2022.

Investment strategies

Ethical investing responding to some short-term challenges

There are significant differences in the sector weightings of an ethical fund versus an index, and while this has caused some short-term headwinds recently, the tailwinds are expected to blow over the long term.

Investment strategies

If you are new to investing, avoid these 10 common mistakes

Many new investors make common mistakes while learning about markets. Losses are inevitable. Newbies should read more and develop a long-term focus while avoiding big mistakes and not aiming to be brilliant.

Investment strategies

RMBS today: rising rate-linked income with capital preservation

Lenders use Residential Mortgage-Backed Securities to finance mortgages and RMBS are available to retail investors through fund structures. They come with many layers of protection beyond movements in house prices. 



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.