The Australian has released an important Newspoll today showing that more than 60% of Australian voters support raising the tax on superannuation contributions for higher income earners:
As shown above, both Labor (68%) and Coalition (59%) support the move, which should give both the Turnbull Government and Labor impetus for reform.
According to The Australian, Prime Minister Malcolm Turnbull is highly attracted to the idea of making concessions on superannuation contributions more progressive, and has held talks with Deloitte Access Economics’ director Chris Richardson, who last year released a blueprint showing how the Budget could save $6 billion a year if super concessions were taxed at a worker’s marginal tax rate with each worker then receiving a flat rebate of 15%.
Deloitte’s plan makes perfect sense. As noted many times before, the key problem with the current superannuation concession system is that the amount of tax concession received grows as one moves up the income tax scale. For example, a very low income earner earning up to $18,200 effectively pays 15% for their superannuation concession, whereas a high income earner earning $300,000 enjoys a 30% tax benefit (see below table).
This system has led to a situation whereby the lion’s share of concessions flow to high income earners, while the poorest workers are penalised, thereby reducing the progressiveness of the tax system and blowing a big hole in the Budget (see next chart).
We already know that Deloitte’s proposal has the support of the Greens, which last year also advocated replacing the current 15% flat tax rate with a progressive system that is closely based on a person’s marginal income tax rate.
This makes super concession reform a fairly easy prospect for either of the two major parties given it would be passed in the Senate.
With the Abbottalypse’s “captain’s call” not to change superannuation taxes now a distant memory, it is great to finally 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.
