The Government’s plans to overhaul super revealed in leaked script

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A leaked budget advertisement script that ‘mysteriously’ found its way into the hands of the media shows that big changes to how the Government plans to tax superannuation may be on the way.

The leaked script reveals the Coalition’s intentions to crack down on high-income super tax concessions, with the hope that it will raise four times the revenue of Labor’s policy.

Labor has promised to cut the income threshold from $300,000 to $250,000, affecting 110,000 Australian superannuants, but the Coalition, it would seem, plans to reduce the lower limit to $180,000 – a proposal that will see an extra 244,000 being taxed at a higher rate. 

The change, expected to be revealed in the 3 May Budget, is estimated to net around $2 billion per year, compared with Labor’s $500,000.

The lower threshold is scheduled to commence in June 2017 once the Abbott Government’s Temporary Budget Repair Levy comes to an end which, in theory, should ease the transition for high-income earners.

Prior to 2012, all super contributions made by employers were taxed at a flat rate of 15 per cent which was seen as a huge concession for high-income earners, but unfair for those on a lower income. Only those earning $300,000 or more were taxed at the higher rate of 30 per cent.

Treasurer Scott Morrison may also refine the caps on how much employees can contribute to their super. Currently, most taxpayers can make tax-free contributions for up to $30,000 per year, or $35,000 for those over 50 years of age. With the new budget, those caps could be reduced to around $20,000 per year.

According to the leaked script held by Sky News, the advertisement states, “New and important changes are happening to Australia’s Tax and Super System. These will make the system fairer and continue driving economic growth. We need superannuation to be flexible enough to work for everyone – particularly those on a low income.” It is also reported by The Australian Financial Review that these advertisements are taxpayer funded.

When asked about this proposal, senior MPs disputed the figures but did not deny the plan. The Treasurer has also declined to comment until the Budget is revealed on 3 May.

Read more at www.skynews.com.au
Read more at The Age
Read more at www.news.com.au

Opinion: Half way to a fairer super system

The Government’s plans to increase taxes on the superannuation incomes of high earners is a step in the right direction, and entirely consistent with responses to the YourLifeChoices Budget 2016 survey but how it will make the system fairer for those on lower incomes remains to be seen.

Lowering the threshold to $180,000 is not such a bad idea, although anyone earning that amount per year is unlikely to require an Age Pension, so it will hardly relieve the financial pressure on, or demand for, the Age Pension anyway. In association with lowering the threshold, the Government may be better served by applying the same rate of tax to super contributions as those on wages.

Australia Institute senior economist Matt Grudnoff pretty much hits the nail on the head: “We know that the top 20 per cent of retirees are not claiming a pension,” he said. “Giving them a (tax) discount doesn’t help take the pressure off the pension in any way.”

If high earners are still taxed at a lower rate, it would seem it is not really helping anyone. They can still make contributions to their super that are taxed significantly less than they would be on their income tax rate. So increasing the concession to a 45 per cent tax rate may make more sense.

The current, and planned, tax concessions still allow for super to be used as a vehicle for estate planning and tax avoidance – something the Government staunchly claims it is trying to minimise.

Still, this would seem to be a step in the right direction. I wonder if it’s fair to speculate that this mysterious ‘leak’ was deliberate – intended to ‘feel out’ response to such a move, in order to better refine the plan?

But the part of this plan that needs to be reviewed is the lowering of the tax-free contribution cap from $30,000 PA for most taxpayers ($35,000 for those over 50) to $20,000 PA. Doesn’t this undermine the intended outcome of making the Age Pension more sustainable? If Australians, at the peak of their earning capacity, are thwarted from making significant contributions to their nest eggs, then won’t more people be reliant on the pension in the future?

Leaving the tax-free super contribution threshold untouched for Australians earning under, say, $120,000 per year, would seem a much wiser idea. Adjusting the caps for high earners would seem more reasonable, as they have the potential to save more over time anyway. Wouldn’t giving low earners, at the height of their capacity to earn, the opportunity to contribute more into their super then minimise their chances of having to be reliant on the Age Pension in the future?

What do you think of this leaked proposal? Do you think the leak was accidental or deliberate? Are these sound plans to protect the future of retirement incomes? Are they fair for all Australians? Do you think the Government is moving in the right direction? What would you suggest to make the system even fairer?

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Written by Leon Della Bosca

Leon Della Bosca is a voracious reader who loves words. You'll often find him spending time in galleries, writing, designing, painting, drawing, or photographing and documenting street art. He has a publishing and graphic design background and loves movies and music, but then, who doesn’t?

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95 Comments

Total Comments: 95
  1. 0
    0

    The cap should be a lifetime cap, so battlers who can’t contribute much in tough years can make up for that if they have a windfall.
    The other ESSENTIAL reform is to change the rebate to 15c less than the taxpayer’s marginal rate, so lower income earners get the most benefit instead of higher income earners getting more taxpayer help to build fat retirement funds.
    As usual, the government is ignoring common sense recommendations and fiddling at the edges, with policy changes that will achieve far too little.

    • 0
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      Rainy makes a great suggestion here – simply change the rebate to 15 cents less than the payer’s marginal rate. Everyone would benefit by a set 15 cents rather than the current system – virtually no benefit for low income earners & a 30 cent benefit for high income earners.

    • 0
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      Two perfectly good ideas

    • 0
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      So why haven’t one of the major parties adopted this quite brilliant strategy?

    • 0
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      I don’t like it. We would be winding the clock back to yesterdays rules when a member could contribute $1m or more in a year. Superannuation was originally designed as a long term forced savings plan for retirement and I believe it should stay that way.

    • 0
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      Sorry Frank, but you couldn’t contribute $1m as there is already limits on both before tax and after tax contributions which would prevent this. I think it is a great idea and we need to lower the limit for low income earners to give them some incentive to contribute more to their own retirement.
      Rainey, you mention “if they have a windfall”. Well, I think this would be considered an after tax contribution and you can contribute $180,000 per year or $540,000 in 3 years so you would be able to make a large contribution if you had a windfall! 🙂

      https://www.ato.gov.au/Individuals/Super/Super-and-tax/Tax-on-contributions/

    • 0
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      GreyViper, I couldn’t contribute $1m regardless of the rules but I have heard of others who did. I flexible lifetime cap on contributions would return us to that.

  2. 0
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    Not much point in speculating…wait for the Budget to be released in 13 days.

    • 0
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      Agree Radish.

    • 0
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      I’m lost with the tax free contributions? I thought contributions were concessionally taxed at 15%? below $30,000 or $35,000 based on age of member?

    • 0
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      Correct Frank AND that $30,000 or $35,000 also includes the employer contribution. So the amount of ‘extra’ super you can have the tax concession on actually decreases the more you earn (because the cap remains the same).

      After tax contributions have no limits BUT they will be tax free at the other end when you withdraw them after retirement.

    • 0
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      So KSS, what you are saying is that for a 55 yo worker on an income of say $250,000 having his employer contributing $23,750 in SGC leaving him a concessional contribution level of $11,250. Or $6,250 if we make him only 45 yo. I could be wrong but Undeducted / non- concessional contributions are maxed at $180,000?

    • 0
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      Wrong KSS, after tax contributions have a limit, see ATO web site for current limits.
      I believe its, $180K per year with a 3 year bring forward rule.

    • 0
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      Frank yes if you are making concessional contributions.

      And yes again to the max $180,000 non-concessional contribution and can bring forward 3 years worth. In my world, that is ‘no limit’ since I will never be able to do that:-( But I don’t begrudge those that can.)

    • 0
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      Yes KSS, it may as well be unlimited for me as well. 🙂

  3. 0
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    Need to wait to hear what they have in mind but because they are conservatives “with silver spoons up their arse” as Jacquie Lambie described them, you can be sure their aim wont genuinely be to improve fairness or the accounts of the bottom 80%. Theyve already made things worse with their drlay/cutting of the compulsory amount, and cutting the facility Labor had to co-contribute extra payments into super, by low income earners.

  4. 0
    0

    I’ll believe it when I see it – but the devil is always in the detail.

  5. 0
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    Yet another thought bubble to test public reaction. They are tiring and typical of when lacking ideas. I very much look forward to July 2.

    An idea I offer to both; cut the nonsense. Give all people of retirement age the full pension and tax all income in the normal way. Simple. This gets rid of the bureaucracy associated with monitoring the current ineffective system and puts everyone on an even footing. Also you are not punished for saving to supplement your retirement as is happening in the current political climate. cheers.

    • 0
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      in principle this is a great idea, heck it can even be extended to the idea of a social wage for all, Unfortunately, it is difficult for government to find the consolidated revenue to afford such largesse without wholesale changes to the income tax assessment act. This idea is much closer to the original intention for superannuation to supplement the pension, not as an alternative.

  6. 0
    0

    This Bozo would sell his mother for a few bucks.

    • 0
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      Bozo … meaning what exactly in this context. You may disagree with his politics but I’m pretty confident a “bozo” he ain’t. Maybe check a mirror to see who the real bozo is in this instance.

    • 0
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      BOZO ..According to a reliable sauce ! Seeing its not in the Dictionary ?
      Bozo…An Incompetent person, especially in New “Company’s”
      Bozo’s have a net negative effect on Morale & Profit ! 🙂 🙂 And everyone knows it !!…. So there ! Exactly how its written ! Now how many of those facts apply here ?? 🙂

    • 0
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      Brian, there you go, as particular said above. Brian, before you open your gob and let your verbal diahorrea flow please do a little research into what you are talking about. That way you “may” appear to be a little bit less of an arse, like what is in YOUR mirror.

    • 0
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      Brian, I’m sorry to say Fast Eddie wins this argument, simply on the high volume of examples. 🙂

    • 0
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      Don’t be sorry, Frank, a spade is a spade is a spade.

  7. 0
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    Super Contributions where a trade off for pay rises in your hand many years ago with the view to build up an individual fund to take pressure off the age pension. That said there should be no tax on the gazetted amount that must be paid into super by your employer as this is law and you do not have access to this money until such time you retire. Any monies contributed to super over and above the gazetted amount should be taxed at the marginal rate one down from your true marginal rate. This give every one the incentive and for those on the lowest marginal rate they would pay no tax on additional contributions to super. I have just retired and will be casting my vote based on the proposed changes to super and pensions.

  8. 0
    0

    Dear Editor, the numbers do not appear correct in this article:

    “Labor has promised to cut the income threshold from $300,000 to $250,000, affecting 110,000 Australian superannuants, but the Coalition, it would seem, plans to reduce the lower limit to $180,000 – a proposal that will see an extra 244,000 being taxed at a higher rate.
    The change, expected to be revealed in the 3 May Budget, is estimated to net around $2 billion per year, compared with Labor’s $500,000.”

    Labour: 110,000 x $5.00 = $550,000. I really do not think the Labour Party policy proposes to collect $5.00 from each wealthy individual. Perhaps $0.5 Billion not $0.5 Million??

    • 0
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      Fair Call! It could be that these leaks are from the Labor Party?

    • 0
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      or maybe the author just sucks at math and for him $2 billion is”four times the revenue of Labor’s policy.”when he meant to write 4,000 times Labor’s $500,000.

    • 0
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      Thanks for your comment Fact Checker. It’s great to receive feedback from our members, and we’re always happy to clear up any confusion that may come about from reading our articles.

      The subject of superannuation is always confusing and, although we try to make our articles as clear as possible, super would have to be one of the most difficult issues to relate to all Australians. In this instance in particular, if you check the figures, I am referring to the number of Australian superannuants who would be affected by Labor’s policy compared to the Coalition policy – not the dollar amount, but the number of people affected…

      I hope that makes it a bit clearer for you. And thanks again for your comment.

  9. 0
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    it does not matter to turnball or his cronie mates they have that much money they don’t care about the lower paid well just wait turnball you and Scott Morrison and that idiot health minister you have got the election will be a about face for you idiots.

    • 0
      0

      Hmmmm. Not really big on the capitals or punctuation here, are we? I think I have gathered from what you are saying here that the current members of the government DON’T CARE about the lower paid. Well, I think it’s unfair to say that any politician from either side of the political spectrum “doesn’t care” about their people. Unfortunately, they have other problems to contend with as well. I’m sure they’d all like to give every pensioner an extra $100 a week but they simply DON’T HAVE THE MONEY! So you go and vote for Bill Shorten and he will wave his magic wand and produce a huge bunch of money out of his ARSEnal of magic tricks and the world will be rosy and the birds will sing and the sun will shine every day.
      But lets not forget that a good part of the reason that we are in the trouble that we are currently in is because of the cash handouts that our dear friend Kevin ’07 splashed around and still has to be payed back …… PLUS INTEREST!!!

    • 0
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      The Libs have run up 77 BILLION more in debt in the last 3 years because they don’t want to raise taxes.

      A government only makes money through taxes.

      Pity the Libs have no clue about money either. – if they don’t get taxes from somewhere – they then have to BORRROW money to pay their bills – BUT HEY – what’s 77 BILLION between friends!

      They are both just as dopey as each other – except the Libs keep telling everyone how financially clever they are – and their faithful followers believe them.

  10. 0
    0

    Labor’s $50,000 proposed drop in the income threshold captures 110,000 with a tax saving of $500m.
    This represents an average of around $4,545 per contributor.
    Whilst the Government’s drop of $120,000 in the income threshold captures 244,000 contributors and $2b in tax saved. This is an average of $8,196. These figures will disappoint some posters who have been railing against very high income earners taking advantage of the system, because what it does show is that the higher the income the less advantage is taken by the contributor. It also shows that the system is working.

    • 0
      0

      The highest earners have often formed a corporation or company or trust and simply don’t worry about superannuation at all. Private business owners are not required to contribute to super.
      Even establishing a SIV in the Caymans is a option for these people. The 110 000 would be well advised to look into setting up a company and contracting their labour to the employer. Good luck to them I say Frank as they are in demand and their labour valuable. They are smart enough to avoid the government’s changing schemes and lack of policy.

    • 0
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      Rae, only those private business owners who are self employed are not forced into super. A sole director for example is treated as an employee under the act and always has been. These SE people would do well to put something away for themselves. Of course many in the $250,000 plus would be Doctors. It wouldn’t surprise me if they are contracting their labour to a service company. I think you’re right the average worker is more affected by these constant changes over the years than the high earners who are more flexible in their arrangements. The Doctors have always supported Labor policy. It would not be in Labor’s best interest to go lower than the $250k?

    • 0
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      As always Frank you poison the minds of readers by trying to pin all bad on Labor whilst ignoring the gross dishonesty of your LNP mates and the deceit where this government at every turn tries to overtax average people and send huge sums of money in the direction of the wealthy.

      I bow to your superior knowledge Rae. Maybe run a longer version of your spiel above to help those of us whose knowledge of how the rich get around the rules is not as good as yours. I for one will be all ears. Thanks.

    • 0
      0

      Gee Frank I wish I was a average worker on $180K

    • 0
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      Stop wishing and make yourself more valuable.

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