In an announcement released yesterday, federal opposition leader Bill Shorten outlined Labor’s tax policy for superannuation if the party is elected to government.
Mr Shorten said the Labor party intends to tax earnings in retirement at 15 per cent for those earning over $75,000 and reduce the threshold of the high-income super charge to $250,000 from $300,000.
Labor predicts these changes will give the federal Budget a $14.3 billion boost over 10 years.
Further, in an address to the National Press Club, Shadow Treasurer Chris Bowen said that if elected, Labor would reinstate the Council of Superannuation Custodians, initially announced by Mr Shorten in his role as Minister for Financial Services and Superannuation under the previous Labor government.
While tax-free retirement income is a “great facet” of the current superannuation system, Taxpayers Australia’s head of superannuation Reece Agland believes it is unsustainable in the long run.
“You look at those that don’t need the tax concession and remove it from them. This is worthy of debate,” Mr Agland said.
However, The SMSF Association’s Graeme Colley told SMSF Adviser he is wary of basing policy decisions on the estimated cost of superannuation tax concessions, given the poor reliability of Treasury’s figures.
In addition, Labor’s commitment to bipartisan support of superannuation seems to be at odds with the early announcement of the party’s superannuation tax policy, according to the SMSF Owners’ Alliance.
“Labor has committed to a bipartisan approach to defining the objectives of superannuation which will influence the future shape of the superannuation system and the appropriate taxation of it,” the SMSFOA stated.
“Yet they have jumped the gun by announcing the new tax more than two years before it will be applied if Labor forms the next government.”
Further, the SMSFOA believes Labor’s policy reduces the incentive to save for independence in retirement and is ultimately economically inefficient.
“Labor says it is reacting to calls for action on superannuation tax concessions for high-income earners. These calls come from predictable quarters – left wing think tanks and industry funds that don’t like SMSFs,” the SMSFOA stated.
“They are usually based on a mis-reading of tax estimates which Treasury itself says contain no policy message and don’t acknowledge that the high-income earners who get most of the superannuation tax concessions actually pay an even higher proportion in income tax.”
Pre 2007 superannuation pension were taxed. Costello introduced a budget May 2006 that meant from age 60 the tax rate on superannuation earnings could be reduced to nil.
Superannuation is now the tax planning vehicle of choice.
A superannuation account balance of $2M earning roughly 6% will pay no tax on $120K – at the concessional tax rate of 15% this concession is roughly equivalent to the aged pension.
At $5M the benefit is 2.5 times the aged pension
At $10M the benefit is 5 times the aged pension.
There are in excess of 25,000 superannuation accounts with balances in excess of $5M.
How much is enough?
Of course if you can always eliminate this superannuation tax by holding your assets outside of superannuation environment and go back to the tried and true planning vehicle of a family trust with a corporate beneficiary and pay tax at marginal tax rates or no more than 30.
Your choice
The “rich” already pay the majority of tax in this country. Now the politicians want to also STEAL our super. Shorten is no more than a common thief with his hand in our pockets. 1m SMSF members now know why NOT to vote for Labor. Also, $1m Australian’s with negative gearing now also know why they should NOT vote for Labor. We done Bill. 2016 election now = a sure win for Abbott
Another silly proposal on taxing superannuation.
I can think of better alternatives outside super for tax-efficient asset and income protection if this nonsense or anything like it gets up.
What Labour also forgets is that the account balance to pay the minimum mandated pension goes down as a member gets older. I have clients well into their 70’s still running their businesses, still building their super balances (and drawing a pension). When they formally retire, they will only need a balance of $1m to exceed the income threshold of dear Labours much thought out scheme. As already mentioned, not a new idea because Swan first proposed it when treasurer, except at a much higher level. I also cannot see it achieving the revenue targets they are claiming either because we will have most of our clients structured fairly quickly so that very little tax will not be paid. One of those ideas that sound right in theory, but will not generate what they believe it should. $14b over ten years is nothing. A reduction in the tax free threshold of $1,000 would achieve at least the same but almost certainly significantly more over the same period.
First threshold $300,000, now proposed $250,000; do you see where their heading??
To earn $75,000 per annum at 5% the fund balance is $1,500,000 and what do financial planners etc say you need for your retirement? A lot more than that.
Oh, there wasn’t any mention of indexing, so in ten years everyone will be paying the tax, except the politicians!
It is the same bleating from Labor that the rich ate getting everything and the poor get nothing. I agree there is some inequity in our system but to continually tax and blame the rich is purely trying to stir up the masses and make him a hero for the supposedly poor. A 2% increase in GST would solve most of the issues and a reduction for the lower income tax payer of 5% should give us a better result. As stated by Cam lets see some fresh ideas and debate.
Not convinced Treasury have thought this through. Super’n investment income is only tax free in pension phase. This proposal is then targeted at retirees (or perhaps soon to be retirees – TTR). If my client was affected by these changes, there would be value in looking to withdraw and re-invest the offending portion of their super’n assets outside super’n – managing any capital gain carefully. The client would have a tax free income up to their $18,200 threshold and perhaps a lot more if low income offsets and franking was taken into account. Has Treasury factored that in to their savings calcs?
the SMSFOA advances a poor argument against the ALP announcement: because high income earners pay more tax, they need to get their money’s worth through generous super tax concessions.
Self interest arguments add no quality to the public policy debate.
Worse still they forget to mention that those with larger Super balances have by and large injected significant non concessional contributions from funds/ savings that have already been taxed at higher marginal rates.
Labor making knee jerk populist policy without thorough analysis, consultation, using a broad strategic approach to national regulatory framework? Gee haven’t seen that before have we? This more reflexive behaviour that imitates the last labor govt disaster.
Rather than completely redesigning the ship of state, which is what’s needed, labor insists on patching the rusting hulk. Then when sound discussion and analysis pieces are raised (eg GST) they stamp their foot like a 2yo and say no without even some basic analysis.
Abbot is twit. But I just can’t figure out if shorten is a union patsie, or an old fashioned shop floor bully and racket runner for his union mates. I suspect the latter.
Isn’t the $75k idea the same as Gillard’s $100k idea from a few years ago? Gillard and Labor didn’t proceed, not doubt as they saw it wasn’t a good idea. For anyone concerned Joe Hockey isn’t a good treasurer, it looks like the alternative is the same. Hockey’s recent suggestion re first home buyers accessing super was a rehash of Howards 1996 policy, which he worked out wasn’t great.
Why do think tanks and lobbyists keep coming up with the same dumb ideas. Why do politicians keep listening to them. You’re all wasting time of people like SMSF Association and everyone else who has to write in to politicians and the media to say how silly the ideas are. Maybe if these ideas were never raised everyone could instead get on with doing work and generating income for the economy.