The AFR has revealed today that the Australian Treasury wanted the Government to implement deeper superannuation reforms that would have raised far more revenue than the package eventually put forward by the Turnbull Government.
According to the article, internal documents from the Treasury, released under freedom of information, showed that in October 2014 it put forward a proposal to tax superannuation earnings that are paid out as a pension at 15%. Treasury estimated that taxing pension earnings at the same rate as the accumulation phase of super could generate revenue of $4 billion a year for the Budget.
Treasury also proposed replacing the 15% tax on super contributions with a system based on marginal rates, but with a refundable rebate of either 15% or 20%.
The internal Treasury document notes that “the tax concession on contributions to superannuation are generally perceived to be inequitable” and that “there would be substantial equity gains by taxing superannuation at marginal tax rates minus a flat rebate”. Treasury also argued that raising revenue this way could also “partially fund other tax reforms, and could be seen as improving the fairness of the system”.
Long time readers will recall that Treasury’s proposals to make superannuation concessions progressive and to tax earnings in the retirement phase at 15% closely mirrors the reform blueprint advocated by MB over many years.
While the Turnbull Government’s package, put forward in the May Budget, falls short of this blueprint, it is a vast improvement on the status quo and should be supported by all and sundry.
