Treasurer Jim Chalmers said last week that the tax would apply to all politicians including the Prime Minister, however, Bragg argued the proposed legislation does not include politicians who will receive defined benefits.
“The legislation does not include the Prime Minister and other ministers who would be subject to this tax. The legislation gives the government a regulation-making power where they can subsequently apply this tax to the Prime Minister and other ministers, but the bill itself does not do that,” Bragg said.
“And, the draft regulations, in fact, don’t mention the scheme that the Prime Minister is actually a member of – the Parliamentary Contributory Superannuation Scheme. I’ve got no confidence that where the legislation doesn’t explicitly include the Prime Minister and members of his fund, that it will actually apply.”
A government summary document states that “those earnings in superannuation funds that the constitution prevents being taxed by the government will be excluded”.
On Sunday, Sky News reported that senior Labor minister Murray Watt conceded a “small group” of former officials will be exempt from Labor’s Better Targeted Superannuation Bill.
The newly appointed environment and water minister said that former state premiers, MPs, governors and judges would be exempt.
He was quoted as stating that Labor had “received an endorsement from the Australian people to legislate in the manner that we put forward”.
“We need to remember that this affects a very small number of people,” Watt said on Sky News.
“That’s a very small part of the community, and the reality is, we will be relying on that taxation revenue to help meet some of our other priorities, like lifting bulk-billing rates in GP clinics and supporting people with cost of living.”
He added that these former state officials “cannot be taxed on their superannuation under the Constitution”.
“We’re of course not going to be introducing laws that are in breach of the Constitution and will be struck down,” he said.
Chalmers disputed Bragg’s accusation and said “when it comes to the Prime Minister, his pension’s not yet known. Now we don’t know his circumstances into the future”.
“Andrew Bragg was on the committee that scrutinised the legislation and said that there’s no allowance in the legislation for defined benefit schemes for politicians. Those are lies,” Chalmers said.
“There is provision for defined benefit schemes, there are calculations, those calculations are very similar to the ones that the Liberals and Nationals put in when they changed superannuation in the last term of the government, and that will apply to the Prime Minister, it will apply to any politician who’s got the equivalent of more than $3 million in super.”
Chalmers added that the actuarial calculation for defined benefits is similar to the calculation that currently applies to the changes that the Coalition made when they were in office.
“There’s a formula which is calculated by actuaries and applied by the Tax Office in a way that is not inconsistent with the way it’s currently calculated to some of the changes that my predecessors made,” he said.
Bragg continued that as the commutations and analysis in regard to the proposed Division 296 tax are complicated, there is no easy way to determine exactly how much tax should be paid for a member of a defined benefit fund, such as the Parliamentary Contributory Superannuation Scheme.
“That’s why I think it’s very important as a fairness measure that the Treasurer say how much he thinks the Prime Minister should be paying if this is going to be applied,” Bragg said.
“The whole idea of having a tax on unrealised gains is insane anyway, but, if the Labor Party thinks this is a good idea and they want to ram it through the Senate with the support of the Greens, they should say how much money would be paid by the Prime Minister.”
He added that as a defined benefit scheme is a guaranteed income stream and there is a value that could be applied to the fund for the purpose of the proposed legislation, it is unclear how that would work in relation to parliamentary schemes.
“There are some draft regulations out there, but most of the pension experts can’t make sense of those because, of course, at its heart the problem with this tax is it applies to unrealised gains, so it applies to money that doesn’t actually exist,” he said.
Unlike others, those who are members of unfunded defined benefit superannuation pensions already pay normal income tax on their superannuation income. Those who may be assessed as having a purported superannuation balance in excess will already be paying a marginal rate of tax of 45 cents in the dollar on their superannuation income.
This includes retired high court justices, senior public servants and politicians.
Applying Division 296 tax to this purported asset will result in these recipients facing a marginal tax rate of 60 cents in the dollar, double the intended rate under this legislation.
Worse still, the way the regulations are drafted will mean women will be charged a higher rate of Division 296 tax than men!
For those on unfunded superannuation Division 296 tax will be applied to a totally artificial and purported capital valuation. It takes the concept of taxing unrealised capital gains to the next level. It introduces the taxation of a gain which can never be realised based on capital which doesn’t even exist.
My understanding of defined benefit funds is that the defined benefit fund pays a defined benefit to its memebrs based on their end salary, and time in office.
So even if the fund pays the tax, the member will still be getting their defined benefit as calculated by the formula within the fund, based on their end salary and time in office.
So for politicians, they still get their same end benefit and the fund pays the tax, and we the poor taxpayers still fund the same pension payment to the member as well as the tax paid by the fund.
So the politicians are no worse off. Just the poor taxpayer.
It’s probably just more spin from Chalmers… just enough truth not to be called a outright ie. Albanese probably has a super fund outside of his DB pension.