Shorten su­per net to trap a mil­lion

The Weekend Australian - - FRONT PAGE - ROSIE LEWIS ADAM CREIGHTON

Up to a mil­lion Aus­tralians would be hit by a com­plex set of su­per­an­nu­a­tion tax changes if Bill Shorten wins gov­ern­ment, new Trea­sury anal­y­sis has re­vealed, with moth­ers re­turn­ing from ma­ter­nity leave and the self­em­ployed among those most af­fected.

As La­bor at­tacks the Pro­duc­tiv­ity Com­mis­sion’s key rec­om­men­da­tion to es­tab­lish a top-10 short­list of de­fault su­per­an­nu­a­tion funds, Trea­sury data ob­tained by The Week­end Aus­tralian shows four of the op­po­si­tion’s less well known tax poli­cies would in­crease tax or sap the re­tire­ment bal­ances of up to 1.17 mil­lion Aus­tralians at re­tire­ment to the tune, po­ten­tially, of hun­dreds of thou­sands of dol­lars.

Josh Fry­den­berg, who has al­ready launched a new-year pre­elec­tion as­sault on La­bor’s neg­a­tive gear­ing, frank­ing credit ban and cap­i­tal gains tax poli­cies, seized on the fig­ures to de­clare the op­po­si­tion’s suite of su­per taxes would not only dis­cour­age peo­ple to save but “pun­ish those who do”.

La­bor plans to cut the cap on non-con­ces­sional su­per­an­nu­a­tion con­tri­bu­tions a per­son can make each year from $100,000 to $75,000 and abol­ish “catch-up” con­tri­bu­tions for peo­ple with su­per bal­ances un­der $500,000 — changes that would af­fect 17,000 and 230,000 tax­pay­ers re­spec­tively.

“If given the chance in gov­ern­ment, Aus­tralians should not be un­der any il­lu­sions about La­bor’s ap­proach to su­per­an­nu­a­tion and their plan for $19 bil­lion of higher, mis­guided taxes and the fur­ther tar­get­ing of as­pi­ra­tional Aus­tralians,” the Trea­surer writes in The Week­end Aus­tralian.

“La­bor is promis­ing to re­duce the non-con­ces­sional con­tri­bu­tion cap from $100,000 to $75,000, which will hit around 20,000 tax­pay­ers. The is­sue is not whether the con­tri­bu­tion should be taxed at the in­di­vid­ual’s marginal rate, as that is not in dis­pute, but rather whether in­di­vid­u­als should be given the choice and flex­i­bil­ity to con­trib­ute more in any par­tic­u­lar year in the event that their ca­pac­ity to do so in­creases. It’s about strik­ing the right bal­ance.”

La­bor would also re­verse scope for peo­ple who are partly self-em­ployed to deduct su­per- an­nu­a­tion con­tri­bu­tions from their busi­ness in­come — af­fect­ing up to 800,000 peo­ple — and lower the high-in­come su­per con­tri­bu­tion thresh­old from $250,000 to $200,000, which would en­sure more higher earn­ers pay the 30 per cent tax rate on their con­ces­sional con­tri­bu­tions.

Michael Rice, an ac­tu­ary at Rice Warner Ac­tu­ar­ies, said La­bor was “at­tempt­ing to cut the value of su­per con­ces­sions for the wealthy”. “The non-con­ces­sional cap (of $75,000) is prob­a­bly OK — not many peo­ple have a spare $100,000 to put into su­per,” he said. “The high-in­come thresh­old is more in­ter­est­ing. Once we go to a 12 per cent su­per­an­nu­a­tion guar­an­tee, there will be some manda­tory con­tri­bu­tions taxed at 30 per cent — that will be un­pop­u­lar.”

The four La­bor mea­sures are ex­pected to raise $18.9bn over the medium term (to 2026-27).

Trea­sury es­ti­mates 130,000 tax­pay­ers would pay more as a re­sult of a re­duc­tion in the thresh­old from $250,000 to $200,000 where the con­tri­bu­tions tax in­creases from 15 per cent to 30 per cent.

La­bor says the four ar­eas over­whelm­ingly ben­e­fit high-in­come earn­ers while hav­ing a mas­sive im­pact on the bud­get.

Op­po­si­tion Trea­sury spokesman Chris Bowen, who de­clared this week that Mr Fry­den­berg’s per­sis­tent at­tacks on La­bor’s eco­nomic plat­form were en­sur­ing a Shorten gov­ern­ment had a rock-solid man­date to im­ple­ment its plans, said the Trea­surer was show­ing “just how out of his depth and in­ca­pable he is”.

Mr Bowen would not say if La­bor re­mained com­mit­ted to the four su­per poli­cies or if the party had any es­ti­mates re­gard­ing how many Aus­tralians they would af­fect or the out-of-pocket costs.

“There’s still no com­ment from Mr Fry­den­berg on Fitch So­lu­tion’s very trou­bling re­port on the econ­omy and bud­get. Mr Fry­den­berg seems only ca­pa­ble of talk­ing about the op­po­si­tion when the na­tion needs eco­nomic lead­er­ship,” Mr Bowen said.

The Trea­surer’s of­fice pro­vided sev­eral cameos based on Trea­sury num­bers to demon­strate the fi­nan­cial im­pact of La­bor’s poli­cies. Ac­cord­ing to the anal­y­sis, if the con­ces­sional catch up con­tri­bu­tion is scrapped, a 30year-old who takes four years leave with­out pay to raise her fam­ily would lose $311,000 in su­per.

“Diana” would make no su­per con­tri­bu­tions while she was not work­ing but, un­der ex­ist­ing ar­range­ments, when she re­turned to work at age 34 she could draw on her pre­vi­ously un­used con­ces­sional con­tri­bu­tion caps to make ad­di­tional su­per pay­ments for the years she missed.

“If Diana had con­tin­ued to work she would have con­trib­uted $15,000 to her su­per each year. In­stead, she fully catches up on her missed su­per­an­nu­a­tion con­tri­bu­tions over the next four years, mak­ing use of the car­ried for­ward un­used cap space to con­trib­ute a to­tal of $30,000 each year,” the cameo states.

“By the time Diana re­tires at 67, her su­per­an­nu­a­tion bal­ance is es­ti­mated to be around $311,000 higher (in 2018-19 dol­lars) as a re­sult of her be­ing able to utilise the su­per­an­nu­a­tion catch-up.”

The $100,000 non-con­ces­sional cap was in­tro­duced in late 2016 af­ter the May bud­get’s mea­sure to im­pose a di­vi­sive pro­posal for a $500,000 “life­time cap” was met with stiff re­sis­tance from Coali­tion MPs, higher earn­ers and the su­per sec­tor.

La­bor in­tro­duced a higher tax on con­ces­sional su­per­an­nu­a­tion con­tri­bu­tions, which had been taxed at a flat rate of 15 per cent since 1988, in 2012 for tax­pay­ers with com­bined gross salary and com­pul­sory su­per­an­nu­a­tion con­tri­bu­tions above $300,000. The Coali­tion gov­ern­ment low­ered it to $250,000 in 2017.

When Mr Bowen an­nounced his su­per re­form pack­age in Novem­ber 2016 he said the gov­ern­ment’s $100,000 an­nual cap on non-con­ces­sional con­tri­bu­tions re­mained “too gen­er­ous” and un­der La­bor the su­per sys­tem would be “fairer and the bud­get will be bet­ter off”.

Mr Bowen yes­ter­day said La­bor re­mained com­mit­ted to a 12 per cent su­per­an­nu­a­tion guar­an­tee but had con­cerns about the “best in show” list of the na­tion’s top su­per funds, which the Pro­duc­tiv­ity Com­mis­sion es­ti­mated could save new job en­trants more than $500,000 over a ca­reer.

“That’s a very big change and I have some con­cerns about it and not just me, lots of peo­ple in the su­per­an­nu­a­tion in­dus­try have con­cerns about it and not just one type of funds, not just in­dus­try but re­tail cor­po­rate funds,” he told 2GB ra­dio.

“A lot of peo­ple say ‘be care­ful what you wish for here’ be­cause if there are 10 funds iden­ti­fied that’s go­ing to make life very hard for the other funds who aren’t on the list and some funds would strug­gle to sur­vive.

“There are some funds frankly that should not be there, they’re un­der­per­form­ing and they should have a good hard look at them­selves and if they can’t lift their per­for­mance they should close them­selves down and go in a bet­ter per­form­ing fund and some of those (are) re­tail funds, there’s a cou­ple of in­dus­try funds, that’s across the board.”

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