The op­po­si­tion says taxes on re­tire­ment it will in­tro­duce four new sav­ings if it wins of­fice

The Weekend Australian - - INQUIRER - JOSH FRY­DEN­BERG Josh Fry­den­berg is the fed­eral Trea­surer.

La­bor’s pol­icy to abol­ish catch-up con­tri­bu­tions will make it even harder for women to close the sav­ings gap

The tax con­ces­sions that sup­port Aus­tralia’s $2.7 tril­lion su­per­an­nu­a­tion sys­tem are de­signed to en­cour­age peo­ple to save for their re­tire­ment. They should not be sac­ri­ficed to fill La­bor’s black hole and pay for its reck­less spend­ing.

In yet an­other des­per­ate cash grab, La­bor has an­nounced it will in­tro­duce four new taxes on su­per­an­nu­a­tion, rais­ing $19 bil­lion. These taxes will hit about one mil­lion work­ers, in­clud­ing mums and dads tak­ing parental leave, those tak­ing time to look af­ter a sick rel­a­tive, tradies want­ing to start their own busi­ness and in­di­vid­u­als want­ing to make vol­un­tary con­tri­bu­tions to self-fund their re­tire­ment.

La­bor’s su­per taxes will not only dis­cour­age peo­ple to save but they also will pun­ish those who do, and they ul­ti­mately rep­re­sent an­other at­tack on as­pi­ra­tion and hard­work­ing Aus­tralians. La­bor has promised to re­move the right, al­ready leg­is­lated by the Coali­tion, of su­per­an­nu­ants to make catch-up con­tri­bu­tions when their su­per bal­ance is less than $500,000. The un­used con­ces­sional con­tri­bu­tions can now be car­ried for­ward five years.

La­bor’s pol­icy will hurt about 230,000 peo­ple who, for a va­ri­ety of rea­sons, have in­ter­rupted their work pat­terns and have been un­able to make a full con­tri­bu­tion to their su­per in any par­tic­u­lar year. This could be a teacher or a nurse who takes a year off to raise a child or look af­ter a rel­a­tive. On re­turn to work, they want to make a catch-up con­tri­bu­tions and still re­ceive the tax con­ces­sion.

Un­der La­bor’s pol­icy a 30year-old in the work­force to­day who takes four years off to raise their fam­ily could be more than $300,000 worse off in re­tire­ment. With women re­tir­ing with just more than half the su­per bal­ances of men, La­bor’s pol­icy to abol­ish catch-up con­tri­bu­tions will make it even harder to close the sav­ings gap. This is de­spite op­po­si­tion Trea­sury spokesman Chris Bowen say­ing, when he was min­is­ter for fi­nan­cial ser­vices, su­per­an­nu­a­tion and cor­po­rate law, that “the gov­ern­ment recog­nises that many work­ers want to make larger catch-up su­per­an­nu­a­tion con­tri­bu­tions as they ap­proach re­tire­ment”, then go­ing on to say that al­low­ing these “catch-up” con­tri­bu­tions would “par­tic­u­larly ben­e­fit peo­ple who have had pe­ri­ods out­side the work­force, the ma­jor­ity of whom are women”.

Sec­ond, de­duc­tions for per­sonal su­per­an­nu­a­tion con­tri­bu­tions al­ready leg­is­lated will be re­versed by La­bor. About 800,000 work­ers are es­ti­mated to ben­e­fit from the con­ces­sion that al­lows them to work part time, tak­ing a salary while es­tab­lish­ing their busi­ness. This con­ces­sion specif­i­cally en­cour­ages the dual ob­jec­tive of en­trepreneur­ship and sav­ings for re­tire­ment, and helps strengthen the small-busi­ness sec­tor — the back­bone of the econ­omy.

La­bor will al­low these bud­ding small-busi­ness peo­ple to get a de­duc­tion for their su­per con­tri­bu­tions only when more than 90 per cent of their in­come is com­ing from their busi­ness. This could de­ter work­ers from con­tribut­ing to their su­per and see a 20-yearold worker to­day nearly $500,000 worse off in re­tire­ment.

What La­bor doesn’t un­der­stand is that emerg­ing busi­nesses take time to get off the ground and often re­quire their own­ers to earn a salary at an­other job to pro­vide the cash­flow needed to make the busi­ness grow. These small-busi­ness own­ers de­serve the same in­cen­tives to save as other work­ing Aus­tralians.

La­bor claims its “mea­sures will make the sys­tem fairer”. How is it fair to pun­ish the shop owner, the plumber and the soft­ware en­gi­neer for want­ing to start their own busi­ness and save for their own re­tire­ment?

Third, La­bor is promis­ing to re­duce the non-con­ces­sional con­tri­bu­tion cap from $100,000 to $75,000, which will hit about 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 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.

The sale of a fam­ily prop­erty or a de­ceased rel­a­tive leav­ing an in­her­i­tance may en­able a per­son to put more money into their su­per in that par­tic­u­lar year. That is not some­thing to be dis­cour­aged. For ex­am­ple, un­der La­bor, a 45-year-old would not be able to put $300,000 into their su­per fol­low­ing the sale of their home and as a re­sult would be $160,000 worse off in re­tire­ment.

Fourth, con­ces­sional con­tri­bu­tions taxed at 15 per cent on the way in are now avail­able to those on in­comes of $250,000 or less.

La­bor is propos­ing to re­duce the thresh­old to $200,000, dou­bling the tax for 130,000 peo­ple who earn be­tween $200,000 and $250,000 a year to 30 per cent.

Again, La­bor gets the bal­ance wrong, fo­cus­ing on rev­enue rais­ing to chase spend­ing. For some­body aged 47 with 20 more years un­til re­tire­ment, La­bor’s pol­icy will re­duce their sav­ings at re­tire­ment by more than $100,000.

As part of its $200bn tax grab, La­bor’s plan for $19bn of new su­per­an­nu­a­tion taxes goes against ev­ery­thing it has said in the past.

In his book Hearts and Minds, Bowen launched an en­thu­si­as­tic de­fence of su­per tax con­ces­sions, say­ing: “They are jus­ti­fied be­cause they avoid fu­ture pay­ments of the age pen­sion and they help boost our pool of sav­ings, with all the ben­e­fits for the econ­omy that this brings.” He went on to say that re­duc­ing these con­ces­sions “cre­ates uncer­tainty for and con­cern by peo­ple who are mak­ing vol­un­tary con­tri­bu­tions to su­per­an­nu­a­tion”.

There was also a time when his leader, Bill Shorten, shared this view. Talk­ing about the im­por­tance of su­per­an­nu­a­tion “tax con­ces­sion­al­ity”, Shorten said as min­is­ter for fi­nan­cial ser­vices and su­per­an­nu­a­tion that “La­bor never, never, never, never gives up on su­per­an­nu­a­tion”. Sur­prise, sur­prise, one “never” for every new La­bor su­per tax.

La­bor’s track record on tax­ing su­per­an­nu­a­tion is clear. De­spite Kevin Rudd promis­ing, on the eve of the 2007 elec­tion, that La­bor wouldn’t change su­per­an­nu­a­tion “one jot, one tit­tle”, La­bor when last in gov­ern­ment im­posed $9bn in new su­per taxes. This in­cluded an in­crease, an­nounced by Bowen 48 hours af­ter he pro­claimed in a mem­o­rable press re­lease an im­me­di­ate “five-year freeze on su­per­an­nu­a­tion changes”.

If given the chance in gov­ern­ment, Aus­tralians should not be un­der any il­lu­sions about La­bor’s ap­proach to su­per­an­nu­a­tion and its plan for $19bn of higher, mis­guided taxes and the fur­ther tar­get­ing of as­pi­ra­tional Aus­tralians.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.