With the Abbottalypse’s “captain’s call” not to change superannuation taxes dead and buried, the Turnbull Government is moving forward with superannuation reform, with Treasurer Scott Morrison vowing to wind-back concessions because they are “a cost to government” that is increasing fast.
As reported in The AFR today, Treasurer Morrison will use a speech today to warn against superannuation being used by the wealthy as “estate-planning vehicles” to gain tax-free income in retirement:
[Super] “shouldn’t be seen as an open-ended savings vehicle for wealthy Australians to accumulate large balances in a tax-preferred environment, well in excess of what is required for an adequate retirement”.
“When Australians see the government supporting the accumulation of enormous superannuation fund balances in a tax preferred, and, in retirement, a tax-free environment, the confidence in the system is significantly undermined”.
“…until tax concessions and the superannuation system are perceived to strike the right balance, there’ll continue to be calls for tinkering and more changes.”
Morrison will also suggest that Budget savings from superannuation reform be used to either cut personal income taxes to mitigate bracket creep:
[Savings may be] “redirected to tax cuts elsewhere to encourage participation, productivity and growth”.
Meanwhile, Prime Minister Malcolm Turnbull appeared on ABC’s 7.30 Report last night and also indicated that superannuation concessions would be pared-back for high income earners in the interest of fairness:
LEIGH SALES: We know you’re also thinking about what you might like to do on tax reform. You came into the job promising to not play the usual game of rule-in, rule-out. Let me ask if you’re prepared to do away with another old game, which is the promise that when economic change comes, nobody will be worse off…
MALCOLM TURNBULL: Well, well, it may – Leigh, I think the – I think the way you’ve got to look at any economic reform is whether it is equitable right across the community… if you had a – changes that resulted in perhaps people on higher incomes bearing a – paying – bearing a higher burden… many people have advocated that there should be some changes to superannuation so that it is – if you like, the tax concession is less generous to people on very high incomes or high incomes. I suppose that would be seen by many people as fair… I mean, the – ultimately – ultimately, the proof of this pudding will be – of this whole exercise will be in the eating, in the outcome and the question is whether the whole outcome is seen to be equitable and that is our absolute objective. It will be a fair set of reforms, … If it’s not fair, it won’t get the public support that it needs to be successful, so, fairness is absolutely critical.
Earlier this month, it was revealed that the Australian Treasury was examining implementing the Henry Tax Review’s recommendations to tax superannuation contributions at a progressive but concessional rate of 20%, along with imposing a lifetime cap on superannuation savings, whereby tax concessions would be removed for amounts over the threshold.
While the details are still under consideration, it is great to see the discussion on superannuation reform shift from “whether it should be done” to “how it should be done”, with all sides of politics seemingly now on the side of reform.
Certainly, reducing the Budget deficit or funding tax reform via fair superannuation reform is far more desirable than via slashing services to Australia’s most vulnerable citizens, which was the preferred approach under Prime Minister Tony Abbott.
