Australia has introduced changes to the tax treatment of superannuation but critics are quick to point out that reforms barely scratched the surface of needed reforms to address the incredible inequity that lies at the heart of the tax treatment of superannuation, according to the Australia Institute.

The government fail to go after the top one per cent of income earners, Treasurer Wayne Swan's tinkering of the superannuation won't even reduce the cost of tax concessions by one per cent, The Australia Institute's Executive Director, Dr Richard Denniss, said in an emailed statement.

"A reform that affects just the top 0.4 per cent of high income earners is hardly a reform at all. In fact, today's announcement will do nothing to stop the cost of tax concessions doubling in the next five years and does not address the bizarre nature of the scheme that delivers more to the top 10 per cent than it does to the bottom 60 per cent," said Dr Denniss.

Treasury estimates that tax concessions on super will cost the budget $32 billion this year and $45 billion by 2015 yet the changes will collect less than $250 million in additional revenue.

"Today's announcement does nothing to change the fact that someone with $10 million in super can withdraw a million dollars per year and not pay a single cent in tax," said Dr Denniss.

Tax concessions, according to the Australian Institure, are the fastest growing expense in the Commonwealth budget. It points the disparity that the wealthiest 10 per cent of Australians receive greater benefit from those tax concessions than the bottom 60 per cent of Australians, the government has today decided to do virtually nothing to reform the system, he explained.

"Put simply, the wealthy can now get generous tax concessions on 'voluntary contributions' that are larger than the full time minimum wage earner. The more significant change it announced today was an increase in the amount that wealthy people can put into their superannuation from $25,000 to $35,000," Dr. Denniss pointed out.

The Australia government needs clear funding for Gonski education reforms, the NDIS and Denticare and the national savings.

Smartcompany.com.au has summarised the changes introduced by Treasurer Swan and Mr. Bill Shorten.

Terry Hayes, tax expert at Thomson Reuters, told SmartCompany this morning the changes are a mixed bag, with some completely unexpected.

"Some of these are very interesting moves," he says.

The changes include :

Tax exemptions for superannuation income streams

The tax exemption for earnings on superannuation assets supporting income streams will be capped to the first $100,000 of future earnings.

Right now, new earnings on assets supporting income streams are tax-free. But from July 1 2014, earnings on assets will be tax free up to $100,000 every year for an individual. Anything above that rate will be taxed at 15%.

Treasury expects 16,000 individuals to be affected by the new tax arrangement in 2014-15, and will save $350 million.

Defined benefit funds

One new change insists members of defined benefit funds, including politicians, will be affected by the reform as well. This is set to save $6 million

Concessional contributions cap

The design and administration of the concessional contributions cap will be simplified. Currently, people aged over 60 can only contribute $25,000 a year. That is set to be raised to $35,000.

The cap will be introduced for over 60s by July 2013, while those aged over 50 can access the cap by July 2014. The general cap will reach $35,000 by 2018.

The higher cap won't be limited to anyone, following advice from the industry that keeping the cap exclusively to people with balances under $500,000 would be too hard to administer.

Excessive contributions cap

Under the current scheme, contributions in excess of the annual cap are taxed at 46.5% instead of the normal 15% rate. This has been a sore point among the superannuation industry.

Now, the government will allow individuals to withdraw excess concessional contributions made from July 1 2013 from the superannuation fund. Also, the government will tax excess concessional contributions at the marginal tax rate, plus an interest charge.

"Treasury estimates that this reform will reduce the tax liability of around 41,000 people in 2013 14, by around $1,300 on average."

"Around 59,000 people on the top marginal tax rate will have a slightly larger tax liability due to the interest charge."

Deeming rules for superannuation account-based income streams

New changes will affect superannuation account-based income streams. Standard pension deeming arrangements will apply to new superannuation account-based income streams assed under the pension income test after January 2015.

"All products held by pensioners before January 1, 2015 will be grandfathered indefinitely and continue to be assessed under the existing rules for the life of the product so no current pensioner will be affected, unless they choose to change products," both Swan and Shorten said today.

Other arrangements will include extending concessional tax treatments to deferred lifetime annuities and reforming arrangements for lost superannuation.

The government will also create a "Council of Superannuation Custodians" to ensure future changes are consistent with the Charter of Superannuation Adequacy.

CPA policy head Paul Drum says while it's good the government has "come clean" on its plans, there is still a need for a review on national savings.

"We could go through item by item, but we need to wait and see the full detail of all of this," he says.

"It hasn't gone through cabinet, or Parliament. This hasn't even gone over the line yet. If there's a change of government, it might not even get up."

With reports from www.smartcompany.com.au