26 August 2017
The federal government would not be making any more changes to the tax treatment of superannuation, the federal Minister for Financial Services, Kelly O’Dwyer, said yesterday.
“The Coalition has done the job that we needed to do on the taxation of superannuation,” she said at a speech to the Tax Institute in Sydney. “The job has been finished and legislated.
“We have no further plans.”
The undertaking paves the way for super to become an issue in the next federal election, with O’Dwyer arguing that the government’s opponents will be the ones promising higher taxes on super.
But there is also expected to be some scepticism about the longevity of the promise, given that former Prime Minister Tony Abbott won the 2013 election with a promise of no unexpected negative changes to super — a promise broken by the Turnbull government in the budget of May 2016.
Changes that came into effect this July have cut the annual contributions that can go into super on a concessional basis from $35,000 to $25,000 a year. The amount that can be put into super on a post- tax basis has been cut from $180,000 to $100,000 a year.
The changes also set a cap of $1.6 million on the amount of money that can go into a super account that is tax-free in retirement mode. The changes have also reduced the attraction of transition-to- retirement plans.
While the tougher measures are estimated to raise some $6 billion a year, the package also included a range of concessions worth some $3bn, including making it easier for people with low super balances to add several years’ worth of “catch up” contributions from next year.
The government also removed the “10 per cent rule”, making it easier for people who work part-time or in small businesses to get a tax deduction for their super contributions.
Ms O’Dwyer’s promises of no further tax changes will be welcome by the industry, which has been complaining that constant tinkering has undermined confidence in the system.
She said the federal government “legislated a comprehensive package of structural reforms to the tax treatment of super to improve the sustainability, flexibility and integrity of the system.
“The measures ensure that superannuation tax concessions are well-targeted and balance the need to encourage people to save to become self-reliant with the need to ensure long-term sustainability.”
She said there would be no more changes to taxation of super but other changes to improve governance were planned.
While the government has claimed the super changes only had a negative effect on a small percentage of people, the extent of the changes provoked strong criticism from some people with larger super balances who had been actively putting substantial sums of money into super ahead of their retirement.
Ms O’Dwyer told The Weekend Australian that future governments might look at the five-year intergenerational reports as a platform to examine the sustainability of the super system.
Ms O’Dwyer said the tax undertaking would “give Australians certainty and the industry stability about the Coalition’s superannuation tax policy”. “It stands in stark contrast to the Labor Party and the Greens, who will slug superannuants significantly more in tax as they prepare for their retirement,” she said.
She said the Greens’ “so-called ‘progressive super’ tax plan” would “seek to extract up to $11bn in extra taxes over four years”.
“Labor have admitted that their superannuation policy will cost superannuants an additional $1.4bn,” she said.
Emphasis added by Save Our Super