Frustration is mounting over the Government’s lack of clarity on tax plans.
Coalition backbenchers are becoming increasingly frustrated with the lack of clarity surrounding the Government’s tax plans and are calling for the Prime Minster and Treasurer to shed some light on the way forward.
While Labor’s plan to reform negative gearing is under attack from Malcolm Turnbull, the Prime Minster hasn’t ruled out changes to the much-maligned scheme by the Government itself. He has said that some details will be revealed before the 2016-17 Federal Budget but MPs would like to know what’s going on sooner rather than later. According to the ABC’s AM program, one MP has come out and said, “We simply don’t know what’s going on.” Others expect an update when Treasurer Scott Morrison meets the Economic Policy Committee this morning or for the issue to be discussed in the party room meeting.
Several Coalition MPs hope that the Prime Minster will announce that there will be no changes to negative gearing but WA Senator Chris Black said the timing was up to Mr Turnbull. "I don't see any reason at all to change the negative gearing processes," he said. "A very significant number of moderate income people in our Australian community negatively gear property and I think it is a very sound investment.” He went on to add, "The Prime Minister doesn't need to be spooked by the Opposition or by commentators into what his position and our position is going to be," he said.
Pressure to leave negative gearing rules untouched could mean changes to superannuation rules are becoming more likely. A few options have been floated, such as lowering from $300,000 to $250,000 the income threshold at which tax on super contributions increases. However, it seems that the most likely change would be to tax superannuation contributions at an individual’s tax rate, with a discount of 15 per cent.
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It would be fair to say that the Government appears to be at sixes and sevens with regards to tax plans, in particular what will be counted in and out at the 1016-17 Federal Budget. Such confusion is bad news for superannuation and those trying to plan their retirement.
Superannuation has long been an easy target for governments to tinker with – partly due to the fact that the system is complex and many people don’t understand what the changes will actually mean for them and, given it’s a long-term savings plan, many people don’t focus on their superannuation as a here and now issue.
By contrast, the benefits to negative gearing are very much immediate for those using the scheme to offset costs for large savings on tax.
And this is a real issue when it comes to saving for our retirement future. Money locked away in superannuation will do its job, that is to provide an income stream for those in retirement, whereas money ploughed into investments that benefit from negative gearing may only pay dividends now, unless they are long term and good investments from the outset.
If the Government really is trying to future-proof our economy against the rising costs of an older population, of which providing an Age Pension is apparently one (although this is questionable), then leave superannuation alone.
Consideration should also be given to reviewing the freeze on any increase to the superannuation guarantee, a cost that is largely borne by employers, but by keeping it at 9.25 per cent the Government claims it is saving money.
Just as it is for individuals, superannuation is not just a pot of money you can dip into when you’re feeling the financial pinch and the Government would do well to remember that.
Do you think superannuation changes make more sense than changing negative gearing rules? Do you understand the long-term effects of changes to superannuation? Should the Government be able to announce its tax plans in its own time? Or do you get a sense that there really are no firm plans in place?
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