Abbott’s ribald super “captain’s call”

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By Leith van Onselen

Tony Abbott’s “captain’s call” not to reform superannuation concessions has been further exposed, with The AFR revealing today that the Coalition was considering making changes to superannuation right up until the Labor opposition announced their policy to partially unwind concessions three weeks before the budget:

In the letter, obtained following a Freedom of Information request lodged by the opposition, the author refuses to detail the options but says super tax changes were proposed for consideration by “a committee of cabinet” as part of the budget process.

Treasurer Joe Hockey was publicly amenable to superannuation tax reform, following the release of the tax discussion paper on March 29 which advocated change. But after April 22, the day shadow treasurer Chris Bowen announced Labor’s policy proposals, the government changed tack.

In a bid to paint Labor as the party of tax increases, it dumped plans for a retirement income review and ruled out any changes to superannuation next term, as well as this term…

The letter all but confirms statements made by Liberal Senator, Arthur Sinodinos, who in May confirmed that the decision to rule-out any reform of superannuation was not based on sound policy-making processes, but rather a “strategic” decision from the Prime Minister:

Senator Sinodinos told Sky News that Mr Abbott was looking for a point of differentiation from Labor by trying to brand it a high-taxing, high-spending party, and Labor’s announcement three weeks ago to change super taxes at the top end provided the trigger.

“It’s a strategic decision,” he said.

Asked if the policy change was run through the party processes, Senator Sinodinos said: “I think it’s really something that has come from the leadership.”

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Meanwhile, Treasurer Joe Hockey, Treasury Secretary John Fraser, and Financial System Inquiry Chair David Murray, have all admitted that reform of superannuation concessions is inevitable, given its massive and growing cost to the Budget.

The Australian Institute of Superannuation Trustees has also revealed that wealthy superannuants will receive double the level of government support than most of their middle-income counterparts, highlighting the unfairness of the current superannuation concession system.

As I keep saying, the biggest losers from the Coalition’s superannuation largesse are ordinary taxpayers, who now face ever-rising tax bills as fiscal drag pulls them into higher tax brackets, raising their average tax rates. Of course, lower income earners are also punished the most through bracket creep.

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But instead of undertaking genuine tax reform – by unwinding superannuation, negative gearing, and capital gains tax concessions in exchange for lower income taxes – the Coalition has chosen to maintain the status quo, continuing the “age of entitlement” for its wealthy constituents.

The Coalition should have pulled the trigger on Abbott when it had the chance. Instead, it now finds itself against the wall with a fiscally unsustainable superannuation policy that has been universally condemned by seniors groups, the superannuation industry, economists, and policy experts alike, which will severely damage its economic/Budget credentials for as long as it remains in office.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.