Don't go under the bed, it's a far cry from a raid
Get a grip, writes Tim Colebatch, a very few people will lose a very little.
From little things, big things grow. But from big things, even bigger things grow. And yes, that will remain true - even if Labor's new plan to take a small nibble at superannuation tax breaks ever becomes law, which is unlikely.
Despite - or maybe because of - the Coalition's scare campaign of the past two weeks, Treasurer Wayne Swan and Superannuation Minister Bill Shorten have proposed an extremely modest tinkering with the generosity of those tax breaks.
There will be no raid on your superannuation savings. There will be no new tax on your superannuation payouts. The biggest nibble would impose a tax on earnings by fewer than 20,000 retirees whose superannuation accounts earn more than $100,000 a year.
A second nibble would have a much wider but shallower cost: Labor will scrap its plan to allow people with less than $500,000 in their account to put in $50,000 a year at the concessional 15 per cent tax rate, instead of the $25,000 cap now applying.
A third nibble would target people who have large savings in their accounts but are still able to qualify for the pension. The rules for the pension income test would be changed so that they are deemed to have earned a certain income from those savings, just as you are when you have money in bank deposits or stocks.
It's hard to argue with any of those. The initial response from the industry was one of relief. John Brogden, chief executive of the Financial Services Council, said it would drop any thought of running a media campaign against the changes.
And there are even some goodies. Those over 60 (and from next year, over 50) would have the cap on their low-tax superannuation contributions lifted from $25,000 a year to $35,000. The Tax Office will start paying interest on the "lost" superannuation accounts it is minding for their missing owners.
This is very mild stuff. And while it might hurt the plans of some who set up a self-managed superannuation fund as their vehicle to minimise tax, there are so many loopholes in the tax system that they have plenty of other choices.
Under existing law, Treasury estimates that Australians will receive a staggering $159.1 billion in tax breaks for superannuation over the next four years. Under the proposed changes, that would be reduced to $158.4 billion. Wow.
But these are only proposals. Swan made it clear they will not be legislated before the election. Rather, assuming the Coalition wins the election, the whole issue of making superannuation sustainable will be left for the new government to fix.
In a way, it's fitting that the next Coalition government should be left to fix up the damage done by the last Coalition government. The Howard government made the superannuation system unsustainable by removing the reasonable benefit limits, which put a cap on the tax breaks, and by then allowing anyone over 60 to withdraw their superannuation savings tax free.
Treasury estimates that the 50 per cent of Australians in the bottom half receive only 13 per cent of those tax breaks. But the 10 per cent at the top receive 38 per cent of them, and the top 5 per cent of us get 26 per cent of the breaks.
That is a profound inequity, and this reform would leave it essentially undisturbed.