A political fight about reforming superannuation turned nasty on Sunday.
But while the Coalition has rejected any move to change the system as a threat from the “sticky fingers” of government, it was not long ago that it accepted a report that detailed super’s growing use as a tax dodge.
Claims of a raid on retirement savings may not be the culmination of their outrage one week after Treasurer Jim Chalmers floated the idea of closing a super tax loophole advantaging the wealthiest and one month before a by-election.
Dr Chalmers argued the nation might get “more bang for its buck” using the money to fill a hole in public finances and provide for future cost rises in aged care and defence.
It’s an argument that might have won over some Liberal MPs in different circumstances.
When a 2020 report commissioned by former Treasurer Josh Frydenberg warned that tax breaks would soon distort the budget he described the finding as “eye opening”.
Fellow Liberal Senator Andrew Bragg, the party’s most outspoken critic of the super system, went further and made a call for fairness.
“(It’s) a real problem,” he told the ABC.
“The whole system needs to be looked at.
“It’s not there for wealth transfers through generations, it’s there as a retirement income system.”
Last week, about two years on, Senator Bragg joined the Coalition’s attacks on what is still only a mooted trimming of tax breaks. He warned during a television appearance that removing concessions would be bad economic management and good only for Labor’s “favoured vested interests”.
Favoured, vested interests
It was fear of a political fight on the charged issue of retirement savings that stopped the Morrison government from taking on reforms following on from a 650 page review of retirement income by Treasury official Mike Gallagher.
Analysis shows that raising generous rates of taxation on the earnings of super fund accounts with balances over $2 million would affect about 80,000 Australians or 0.5 per cent of Australians and return $1.7 billion to the budget.
“They’ve got very sticky fingers, this government. They want to come after your money,” shadow treasurer Angus Taylor said on Sunday.
Taxation on super earnings is usually 15 per cent, or much lower than the marginal tax rate or company tax rate.
For tax reasons
Known to most voters only as a government supported system for their personal retirement funds, the review and more recent stats show super is increasingly becoming something else entirely for a relatively small cohort of wealthy Australians.
The 100 largest self-managed superannuation accounts in the country controlled more than $9.7 billion in 2020 while the single largest had over $400 million, ATO data shows.
The year before a Howard government change to super taxation, in 2005, only 151 Australian superannuation accounts had balances over $10 million: just over a decade later that number had exploded to 1839.
Accounts with balances over $10 million receive tax breaks equivalent to $160,000 a year, the Morrison government Retirement Income Review found in 2020.
That tax lure has changed the purpose of the super system for people on very large balances, the report said.
“It appears that large balances are held in the superannuation system mainly as a tax-minimisation strategy, separate to any retirement income goals,” the Treasury report stated.
Self-managed funds with balances north of $10 million generated returns of 20 per cent in 2020-21 compared to an average of 12.9 per cent for self-managed funds, and 24 per cent in 2016-17 compared to 5 per cent.
“The impact of earnings tax concessions means higher-income earners receive more lifetime government support in dollar terms than lower- and middle-income earners,” the Treasury report found.
Does not deliver
Senator Bragg joined a unified front last week after Opposition Leader Peter Dutton vowed the Coalition would overturn any policy changes in government.
“Labor is lining the coffers of its favoured vested interests at the unions and super funds,” he said.
Contacted by The New Daily on Sunday, Senator Bragg did not directly say if his stances were in conflict.
“Super is a totally failed system which does not deliver a dividend to the taxpayer,” he said.
“The government should be getting rid of their enormous off-balance-sheet slush funds and banking revenue gains rather than raising taxes.”
Senator Bragg said he opposed the government’s plan to stop future withdrawals from super as the previous government allowed during the pandemic.
Dr Chalmers said that a structural budget deficit is making it harder to fund growing needs in national defence and aged-care.
The New Daily is owned by Industry Super Holdings
