Bowen to reform more tax concessions

Via the AFR comes Chris Bowen speaking today:

Mr Bowen says Labor will build on its announced plans to curb negative gearing, halve capital gains tax exemptions for investors, increase the top rate of income tax, and change the tax treatment of trusts.

…”The Howard/Costello largesse which largely benefits wealthier Australians continues to hamper the budget getting back to surplus,” he will say. It is understood Labor, which is favourite to win the next election, will not touch what is left of the private health insurance rebate which it means-tested when in government, but other areas, such as the tax treatment of superannuation in retirement, could be vulnerable.

“An important part of any sensible fiscal strategy is identifying those tax concessions which eat away at the revenue base…Mr Bowen lists un-means tested tax-free super in retirement as one of the profligacies of the Howard years…

This is consistent with previous Labor discussion in opposition. Previously from The AFR’s Philip Coorey:

The new measure would be to reduce from $100,000 to $75,000 the annual cap on non-concessional contributions that could be made by an individual, with a maximum three-year carry forward of $225,000…Labor will propose lowering from a proposed $250,000 to $200,000 the income threshold at which a person’s super contributions are taxed at 30 per cent rather than 15 per cent. The current threshold is $300,000.

Good call. The Coalition’s superannuation reforms, while certainly worthwhile, were always far too weak and did not go anywhere near far enough to restore integrity to the system.

As shown by the Grattan Institute, superannuation remains ridiculously generous to high income earners even after some Coalition cuts:

Even after the reforms, super tax breaks will overwhelmingly flow to high-income earners who do not need them. People in the top 20 per cent of income earners, who are unlikely to ever get a pension, will still receive about half of all super pre-tax contribution tax breaks.

Treasury projections in the 2016 Budget show that the lifetime value of tax breaks to high-income earners remains much higher than the value of the Age Pension for low-income earners, even after the Government’s Budget changes (Figure 9). These projections are likely to be conservative since they ignore post-tax super contributions, which are largely made by high-income earners, boosting the super earnings tax breaks they receive.

Before the changes, someone in the top 1 per cent of income earners could expect to receive two and a half times as much in tax breaks from super over their lifetime as a retiree with no assets receives in pension. This is also two and a half times as much as the average income earner receives in pension and super tax breaks combined. The Budget changes merely trim the worst of these excesses: the top one per cent now receives just twice as much as low or average income earners.

In other words, higher income earners will continue to make out like bandits from superannuation, hence there is more reform needed to restore integrity and sustainability to the system. As we know, tax concessions are the great systemic corruption in the system: