The federal opposition has called for changes to the taxation of superannuation that would affect high-income earners and retirees with super balances above $1.5 million.
Opposition leader Bill Shorten said if elected Labor would ensure retiree phase earnings above $75,000 would be taxed at a concessional rate of 15 per cent.
Broadly speaking, investment earnings from superannuation are currently tax-free.
Labor’s proposed change would affect retirees with super balances of $1.5 million and above, assuming annual investment returns of five per cent.
The opposition will also lower the threshold for the 15 per cent High Income Superannuation Charge from $300,000 to $250,000 to “better align tax incentives”.
As it stands, Australians with incomes of $300,000 and above are effectively taxed ‘double’ (ie. 30 per cent) on their superannuation contributions.
Mr Shorten said the two measures would save $14.3 billion over 10 years, and are “responsible, fair and final”.
Speaking at the National Press Club yesterday, shadow treasurer Chris Bowen said the proposed changes would be the only changes to superannuation by Labor in its first term back in office.
Labor would also create a Council of Superannuation Custodians to review the super system and recommend changes every five years, as proposed by Mr Shorten when he was the financial services minister, Mr Bowen said.
“The current government didn’t adopt that proposal, but it’s a good one and will be adopted by the Shorten Labor government,” Mr Bowen said.
“We want to see superannuation taken out of the annual budget cycle,” he said.
Financial Services Council (FSC) chief executive Sally Loane was asked about Labor’s proposal at a media briefing yesterday morning.
“[We should] stop super being included in every annual budget cycle. It would be really sensible if we had a bipartisan position where we defined the purpose of superannuation.
“Superannuation absolutely should be on the table but shouldn’t be looked at in isolation,” Ms Loane said.
Reacting specifically to the Labor proposal, Ms Loane said the FSC does not support “just picking single levers to try and get to reform”.
“We do actually believe in constructive debate, and on that basis everything should be on the table, including the ALP’s policy on super tax this morning.
“It certainly adds to the debate and will get everyone talking about this,” she said.
A statement by Industry Super Australia (ISA) said the Labor proposals would “put super tax concessions on a fairer and more sustainable footing”.
“It reflects the reality that tax concessions on earnings for retirees are growing at more than twice the rate of the age pension.
“A bipartisan approach is essential: firstly to produce a clear objective for superannuation and then to calibrate tax concessions to achieve this objective,” said the ISA.
Prime Minister Tony Abbott recently confirmed that the Federal government will make no changes to superannuation in the current term.
However, the government’s recent tax discussion paper raised the lack of equity in the current superannuation tax environment.
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