Tax concessions that tend to benefit the wealthy and were previously ruled untouchable by Tony Abbott, are now back on the table as the new Prime Minister reveals that nothing is off the table in regards to tax reform.
Meeting in Canberra, with unions, business leaders and welfare groups, on Thursday of last week, the Prime Minister reached an in-principal agreement to review a raft of tax concessions to determine if they were still “fit for purpose’. This means that concessions on taxing of superannuation, capital gains tax on property held more than 12 months and negative gearing, which are all seen to benefit the wealthy, could be on the chopping block.
Business Council of Australia Chief Executive Jennifer Westacott said of the meeting, “There was a very, very strong agreement that concessions needed to be looked at”.
The meeting marked the first ACTU-Coalition discussions since before the Coalition government came to power in 2013. The members of the high-powered group were invited to Canberra by Mr Turnbull to brief his economic on its deliberations, especially those resulting from August’s National Reform Summit in Sydney. While it was agreed that there were issues such as raising GST and removing Sunday penalty rates, would take longer to work through due to opposition from unions and the welfare lobby, these should not hold up progress on issues on which everyone was in agreement.
The Prime Minister was joined at the meeting by several of his cabinet ministers including Scott Morrison, Matthias Cormann and Kelly O’Dywer and while the mood as participants left was positive, there was still a cautionary note, with ACTU union leaders promising resistance to changes on GST and penalty rates.
Read more at The Age.
While any kind of tax reform on generous superannuation tax concessions may be some time off, at least the Government has displayed a willingness to discuss the issue.
To understand what type of money we’re talking about, a recent assessment by the Association of Superannuation Funds of Australia (ASFA) noted that 475 superannuation accounts had balances of $10 million plus. That is money that has been squirreled away at a reduced tax rate and, when accessed after the age of 60, will be tax-free.
But it’s not just the ridiculously rich that are benefiting. ASFA also noted that there were 24,000 accounts with a balance of over $2 million and in total, there are over 60,000 superannuation accounts with balances over $1.5 million. This means that there are over 60,000 people earning hundreds of thousands of dollars tax-free.
Of course, it’s not only the tax-free income after 60 that needs to be addressed for the wealthy, but also, the rate of tax paid on contributions to superannuation. An individual can earn a whopping $300,000 a year and still only pay the 15 per cent concessional rate on their super. This saves 32 per cent in salary sacrificed contributions (including employer contributions), which can be up to $50,000 per annum if over 50 years of age.
Changes to negative gearing and tax concessions on capital gains tax if a property is lived in for more than 12 months, may take some of the heat out of the property market, as well as creating more income for the government.
To blindly refuse to change something is stubborn, to not change something that is of such benefit for many is downright foolish. Let’s hope Mr Turnbull and his government see sense in what so many others do.
Do you think superannuation concessions for the ridiculously wealthy should be back on the table? Or should those with lower superannuation balances be given more concessions? Is superannuation the best means of saving for retirement?