In its latest economic survey of Australia, the OECD recommended taxing superannuation earnings for retirees at 15 per cent, the same working-age people already pay on super fund earnings.

In its report, the OECD said that Australia is at risk of long-term structural deficit if it does not address tax reform.

It said without tax reform Australia was at risk of a higher reliance on income tax paid by working-age people as the population continues to age.

“Further reducing tax concessions on [superannuation] private pensions would more closely align their tax treatment with that of other forms of saving and raise revenues,” the OECD said.

Currently, superannuation accounts of up to $1.9 million that are rolled over into the pension phase are tax-free.

The OECD said that “this implies that income channelled through the schemes is undertaxed over the lifecycle, particularly for richer people with high marginal tax rates”.

“A package of changes includes taxing superannuation earnings in retirement at 15 per cent and capping pre-tax contributions at $20,000.”

It continued that introducing a further tax on superannuation could push people to use trusts (for example) to reduce their tax imposts.

“The number of trusts has grown rapidly over the past two decades with these vehicles potentially used to reduce household tax liabilities by splitting income to use all beneficiaries’ tax-free thresholds,” the survey stated.

It suggested the government investigate more closely how trust structures are used as a tax-saving method as well as the value of income being directed through them.

Peter Burgess, CEO of the SMSFA, said changes to the taxation treatment of superannuation earnings in retirement need to be considered in the context of the Australian retirement income system, and the impact it would have on government expenditure on the age pension.

“Too often the argument centres on the revenue gain associated with increasing superannuation taxes without due consideration given to the impact on government expenditure over time,” he said.