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.”