Government puts super tax legislation on agenda again

In a press conference late on Tuesday (17 December) Treasurer Jim Chalmers said the focus for the government is “some unfinished business when it comes to some of the tax measures that we’ve already announced, multinationals, super tax concessions and the like and that’s our focus rather than new elements of an agenda on that front”.

He said the government would be focusing on its existing tax reform agenda, which included making super concessions “fair and more affordable”.

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“Our job [in government] is trying to strike the right balance. The fine balances that we have been striking are broadly right,” he said.

“Our job is to make the right budget decisions for the right economic decisions.”

According to the Tax Expenditures and Insights Statement, concessions on superannuation earnings and contributions are forecast by Treasury to cost the federal budget $55.2 billion in 2024–25.

This comprises $31 billion in contribution concessions and $24.2 billion in earnings offsets.

The report said superannuation concessions are weighted to those in the higher taxable income deciles, and the share of the benefit for people in the lowest deciles was negative as on average they faced a personal income tax rate that was lower than 15 per cent.

“People in higher taxable income deciles received a larger share of the benefit due to making larger contributions and paying higher marginal rates of tax, which makes the flat 15 per cent rate of tax on superannuation contributions more concessional,” it reads.

The benefit from super earnings tax concessions was highest for people aged 55 to 69, reflecting their higher incomes and longer accumulation periods.

SMSF Association CEO Peter Burgess said the super tax legislation is still on the books, but it was unclear as to whether the government would try and push it through when it returns in February next year or take it to the next election.

“It’s also unclear how much political capital they are prepared to expend on this measure in its current form,” Burgess said.

“They have already had a taste of the opposition to it when they did not have the support to pass it in late November. They are going to have to do some changes to it or do some deals with the crossbench.”

Burgess said the government has not considered the impact this legislation will have on economic prosperity and Treasury has also not considered the widespread damage from taxing unrealised capital gains.

“There are intrinsic links between superannuation members impacted by this tax and small business, primary producers and angel investors.”

Burgess added that no one begrudges a fair and equitable superannuation system, but the design of this tax was fundamentally flawed and would affect many more than just those with large super balances.

“Treasury’s impact analysis fails to acknowledge the knock-on and widespread collateral damage caused by taxing unrealised capital gains. It fails to recognise the intrinsic link between superannuants impacted by this tax, small business owners, primary producers and angel investors. Until such time the government addresses these issues, it will be difficult for them to pass this bill.”

“It is inconceivable that at a time of stagnant economic growth, which was confirmed today in the government’s mid-year budget update, the government is pursuing such an unconscionable new tax on the very sections of the economy needed to drive productivity, innovation, and economic growth.

“It’s equally inconceivable that the government would continue to expend its political capital on a measure that has many unintended consequences and is feared by many as setting a dangerous precedent for future tax reform. It doesn’t need to be this way. There are other ways of addressing the nation’s stockpile of large superannuation balances that do not impose such a heavy toll on small business, innovation and primary producers.”