Abbott reinforces the super untouchables

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by Chris Becker

The latest on reform today from the AFR is the total abandoning of any pension/retirement changes:

The Abbott government has dumped plans for an inquiry into retirement incomes and toughened its opposition to changing the tax treatment of superannuation by ruling it out beyond the next election as well.

Seeking to define the pre-election battlelines by branding Labor as the party of high taxes, Prime Minister Tony Abbott upgraded the Coalition’s policy of making no adverse changes to super this term to one of making no changes at all.

“There will be no changes to super, no adverse changes to super in this term of Parliament, and we have no plans to make adverse changes to super in the future,” he said.

In other words, we don’t want to lose any election in the future by alienating the core Baby Boomer vote, at the behest of the ticket clipping managed fund industry in Sydney.

This comes after a stark warning from the recent white paper on the taxation system which rightly called the tax-fee status of super withdrawals as “unsustainable”.

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Like other policy points, the LNP is finding itself a lone voice in an arena full of reason, and not just from across the floor in Parliament, but with business heavyweights, almost all economic think tanks, the Murray inquiry and even its own white paper and reviews.

The ALP is at least having a crack at a policy, although its direction and structure is not spelled out as a total review of the pension/super quango:

Labor government would levy a 15 per cent tax rate on super income of more than $75,000 and reduce from $300,000 to $250,000 the income threshold at which the tax on a person’s super contributions increases from 15 per cent to 30 per cent. Combined, the measures will raise $14 billion over a decade.

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This is a very modest start to reign back the forecast massive concessions that are growing at 11% per annum which by 2017-2018 will cost taxpayers nearly $50 billion annually. Reverting to the pre-Costello flat 15% tax on all earnings needs to be the minimum starting point, in addition to removing or at least adjusting the concessional tax rates for higher income earners.

Australia is facing a decade long slump in national income and can ill-afford to put off changes to its broken retirement system. Not only is a review and honest discussion required about the taxation treatment of superannuation, but also how those funds are employed and the costs of managing them.

The biggest discussion should be about if the nation really needs to be saving more of its dwindling income by increasing the compulsory superannuation contribution and leaving it as zero interest deposits (or bank shares, but I repeat myself). At a time when critical infrastructure and investments are left unfunded as the country leaps over the mining capex cliff.

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Australia needs leadership in this area, and none is forthcoming from the Abbott camp.