Leaders clash over contributions for self-employed in final debate

In a televised debate between the leaders of the two major parties, Scott Morrison asked Opposition Leader Bill Shorten to provide further details about how Labor plans to change tax deductions for superannuation contributions as well as costings and revenue projections for the measure.

“The question I have for Bill Shorten on behalf of 800,000 Australians, and these are self-employed Australians, is on superannuation contributions,” Mr Morrison said.

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“When these self-employed Australians make superannuation contributions, these self-employed people will not get access to the tax deductions for superannuation contributions that wage earners get because Labor is changing that policy. What I want to know is why Bill Shorten wants to target those individuals, and how much revenue will he be raising from that increase in tax from those Australians?”

In his response, Mr Shorten assured that superannuation would “still be preferentially treated” for the self-employed.

“What I mean by that is that if you pay money into superannuation, it is taxed more beneficially than what it will be if it’s taken as income,” Mr Shorten said.

“This is a government scare campaign that superannuation is not going to be available. We are making some changes, there’s no question about that, but in terms of the costings, we will release our final costings on Friday.

“Superannuation will still be preferentially treated, but it won’t be quite as generously treated as it was.”

Labor has previously announced that it would reverse the changes that the Coalition made to the tax deductibility for personal superannuation contributions.

In the 2016 budget, the Coalition government introduced a measure to remove what was known as the 10 per cent test, effectively allowing greater numbers of people the choice of claiming a tax deduction for making personal superannuation contributions.

The 10 per cent test, which has been scrapped since 1 July 2017, prevented those earning more than 10 per cent of their income from salary and wages from claiming a deduction for personal superannuation contributions.

The removal of the 10 per cent test was strongly welcomed by the SMSF sector, which had long lobbied for the change, as it placed everyone in the same position in terms of being able to make a concession contribution, provided they were earning some form of assessable income.

While self-employed individuals earning the bulk or all of their income from their business as opposed to salary or wages paid by an employer would generally have no trouble meeting the 10 per cent rule, it made it difficult for individuals who were self-employed and also earning wages from work as an employee at the same time.

One of the key issues with the 10 per cent test when it was in place was that it was difficult to administer.

“People would think they were under the 10 per cent but would just tip over, which meant that amounts that were put into super weren’t deductible, which can have a big effect,” former ATO executive Stuart Forsyth told SMSF Adviser previously.

It could lead to situations, he explained, where a member is forced to take an amount out of super because they don’t have a concessional cap, and because they’ve gone over the 10 per cent, it’s no longer a concessional contribution.