8 November 2016
David Crowe | Political correspondent | Canberra | @CroweDM
Bill Shorten and his shadow cabinet have finally decided to squeeze $4.5 billion in extra tax revenue from superannuation over the next four years. It is a bold plan. So bold, in fact, that Shorten could not be straight with Australians about it when he was seeking their votes.
Labor has confirmed a policy that will collect $1.5bn more in super taxes than the government. This is three times the size of the government’s backpacker tax but gets a fraction of the attention.
You will not hear this in all the cries over “chaos” in politics, but Labor has taken six months to make up its mind on this policy. It has repeatedly promised to reveal its hand but hidden the details at every stage.
Labor has an excuse for taking its time. Malcolm Turnbull and Scott Morrison were forced to rewrite some of their own policy after a backlash from the Liberal Party base, making the government’s plan a moving target.
Even so, what Shorten did on super reveals the same flaws he sees in Turnbull. He dithered. He waffled. He promised one thing and delivered another.
Scott Morrison outlined the super changes on budget day, May 3. The package raised taxes by about $6 billion over four years but used half of this to pay for sweeteners such as top-up for low-income workers, catch-up contributions for those who return to the workforce and tax-deductibility for some contributions. The overall package added $3bn to the bottom line.
Shorten walked both sides of the street throughout the election campaign. He formed a unity ticket with the government’s conservative critics to attack the retrospectivity of one measure yet he adopted the overall tax increase at the same time. His policy platform included the $3bn in extra revenue.
Shorten was sometimes challenged on this but obviously not challenged enough. Five days out from the election, he was asked why he could embrace the saving without telling voters what his actual policy was.
“Are you planning some other hit to super that we don’t know about?” a journalist asked.
Shorten’s response was political waffle. “We will revisit these measures to see their workability, to fully understand if they can actually be done,” he said.
He and his colleagues made no mention of a policy that would keep more of the tax revenue and cancel the sweeteners.
This is what Labor assistant treasury spokesman Andrew Leigh said on June 27: “So we’ve committed, if we win office, to using the resources of Treasury, consulting quickly on that, coming up with a measure which achieves the same impact on the budget bottom line, but ideally without the retrospectivity of the government’s changes.”
That’s right. “The same impact on the budget bottom line.” That is what the Labor election platform said and what Labor frontbenchers said.
Labor finance spokesman Jim Chalmers promised to reveal the details before election day and never suggested the policy would raise so much more revenue. “People will know by the time they go into the polling booth where we stand on superannuation,” he said on May 26. That never happened.
Looked at over two years, the bidding war on super is obvious. Chris Bowen moved first in April 2015 with a plan to raise taxes on the very biggest super funds. Abbott rejected this. Turnbull revived the idea after taking power and then out-bid Labor with a bigger tax increase. Shorten played for time but eventually went for an even bigger hit.
The scale of the change is in the numbers. Bowen’s first plan in early 2015 raised $14.3bn over a decade. The Labor plan decided this week raises $32.6bn.
The revenue gain mostly comes from embracing all the tax increases put forward by the government but cancelling two sweeteners – the catch-up concessional contributions and the tax deductibility for personal superannuation contributions.
This highlights a constant dynamic between the major parties. The Coalition could only move when Labor gave it cover. Labor’s instinct was to bank a Coalition tax increase and raise it. Both sides calculated they could survive the electoral blowback. On this issue, the Coalition took the bigger political risk.
Labor has played the politics of superannuation brilliantly. It denounced a tax increase while embracing it and then expanding it. Voters deserved to hear before July 2 what Shorten has revealed today.