The government risks undermining confidence in its superannuation reforms and leaving Australians poorer in retirement if it reduces tax breaks on super savings contributions to bring the upcoming budget into surplus, industry bodies said last week.
In a rare show of unification, four industry bodies released a joint statement voicing strong opposition to a leaked plan to increase a tax on super contributions for high-income earners. The plan would help Treasurer Wayne Swan deliver a budget surplus on 8 May.
The Financial Services Council (FSC), the SMSF Professionals’ Association of Australia (SPAA), the Australian Institute of Superannuation Trustees (AIST) and the Association of Superannuation Funds of Australia (ASFA) called on the government to rule out the tax changes.
They said the government’s relentless changes to super were eroding confidence in the system and were short-sighted.
“Any savings for the budget through reducing concessions in superannuation would be far outweighed by costs borne in future budgets,” FSC chief executive John Brogden said.
ASFA chief executive Pauline Vamos told InvestorDaily the move would leave Australians worse off in retirement.
“For the sake of $1 billion in revenue for the government, which is all ASFA calculates it would raise, they will be undermining one of the best systems in the world and condemning many Australians to retirement without dignity,” Vamos said.
She warned the move would deter Australians from saving for retirement and undo 20 years of hard work in getting Australians to do so.
“Any voluntary contributions will just go – and that’s across the board,” she said.
Swan has honed in on about $30 billion worth of super tax concessions as a means of returning his upcoming budget to surplus. The move would raise the 15 per cent concessionary tax rate on taxable voluntary super contributions.
The government has announced a raft of super reforms, including increasing the superannuation guarantee rate from 9 per cent to 12 per cent over the next eight years.
A spokesman for Swan’s office said: “The government doesn’t intend to comment on budget speculation except to say we will continue the strong economic management that has seen our economy become one of the strongest in the advanced world.”
However, Vamos said the government needed to stop treating the pool of super funds as a honey pot to be dipped into whenever it needed money.
“To proceed with the kinds of tax changes that have been leaked today as under consideration would be bad for women, those close to retirement and self-employed workers who we are trying to encourage to save for their retirement,” she said.
Opposition assistant treasury spokeman Mathias Cormann called the measure a tax grab.
“This latest tax grab comes on top of previous tax increases targeting those Australians saving for their retirement, such as Labor’s dramatic reduction in concessional contribution caps, down from $50,000 and $100,000 to $25,000, and savage cutbacks to the successful and popular co-contribution scheme,” Cormann said.
Under the co-contribution system, the government contributes 50 per cent of employee contributions up to $500 a year, down from a threshold of $1,500 when Labor took power in 2007.
“These additional Labor Party taxes on superannuation are completely counterproductive as they make it harder for people to achieve self-funded retirement and thereby reduce the burden on the public purse,” Cormann said.
