If Bill Shorten truly wanted to change the rules on debates about superannuation by creating a Charter of Superannuation Adequacy and Sustainability that is above politics and which prevents superannuation being the ‘’plaything’’ of the annual budget cycle why did he and Wayne Swan announce significant changes to the taxation of superannuation today?
While the changes are nowhere as radical and controversial as some of the options mooted over the past few weeks as the government tested the likely response to a revenue raid on the funds of high net worth superannuants, new taxes that Swan expects to raise $10 billion over the next decade are hardly insignificant.
More to the point they do represent another tinkering with the system, within which the savings of individuals have been compulsorily trapped, weeks ahead of the budget of a cash-strapped government under the severest of political pressures.
‘’It (super) shouldn’t be a subject on which some, to gain political power, spook the confidence of what is a very good system,’’ Shorten said. Quite.
If, as Swan has said, the changes are about long-term reform of the super system, why the haste?
Why not have a proper, formal, structured process to look at the sustainability of the current system and produce a dispassionate analysis of how it might be improved – or left alone. Why did it have to be rushed out ahead of next month’s budget?
It couldn’t have something to do with the $900 million of ‘’savings’’ the changes will produce over the forward estimates, could it?
The Gillard government, with the starting point of another deficit of perhaps $14 billion or $15 billion this year, has yet to explain how it will fund the Gonski education reforms and the National Disability Insurance Scheme. Gonski is a $6 billion a year commitment and the NDIS, while costing about $1 billion a year initially, will cost $22 billion a year from about 2018.
While one can question the process, the changes themselves aren’t the full-scale attack on the wealthier superannuants that had provoked a widespread and increasingly noisy backlash from across the superannuation industry and, indeed, from within the parliamentary Labor Party itself.
They do add some complexity to a system that Peter Costello dramatically simplified towards the tail end of the last Coalition government when he declared all earnings from superannuation would be tax-free for those past the retirement age.
In effect Shorten and Swan have, after previously announcing a doubling of the tax on contributions by high-income earners to their funds, re-introduced a form of the reasonable benefit limits that Costello did away with by announcing that earnings from a superfund in pension phase above an index $100,000 a year will be taxed at 15 per cent. At today’s rates of returns, that means the earnings of funds with about $2 million in them will again be taxed, albeit at a concessional rate.
That, and the assumptions of the savings for future budgets, pre-suppose, of course, that the industry of highly-paid experts on super and tax don’t come up with ways to reduce the effective rate of tax paid.
Shorten and Swan have also announced that they will lift the concessional contributions cap from $25,000 to $35,000 from July 1 next year for those 50 or over and from July 1 this year for those 60 years and over and have softened the existing punitive regime for excess contributions, which had produced some very unpleasant unintended consequences. Those changes will be welcomed by the industry.