By Glenda Korporaal
The federal government’s proposed tax hike on the earnings in super funds above $3m has set down a plank for the 2025 election.
While it is hard to argue that people with hundreds of millions of dollars in superannuation should receive generous tax breaks, opposition leader Peter Dutton now has a clear point of difference between his party and Labor.
After Labor said in the last election campaign that it had no plans to change the superannuation system – only to announce what amounts to a significant change this week – it is now open to Dutton to raise questions from now until the end of the 2025 election campaign about what is next?
The federal government will be hoping that any controversy over the proposed tax changes will be bedded down in law and accepted at a fait accompli by the election.
By making the announcement this week on its super tax plans, it allows the proposed extra revenue to be factored into the four-year forward estimates for the May budget.
Chalmers estimates that the proposed changes will generate some $2bn a year in its first full year of revenue after the election – a handy figure to make its budget estimates look better than they would have.
But after moving so quickly on superannuation after Albanese’s assurances to voters before the election, it is now easy for the Liberals to accuse Labor of having the potential to break more promises in future in the name of budget repair.
The superannuation tax issue can allow the Liberals to draw some clear dividing lines between itself and Labor and potentially mobilise some of the disaffected traditional Liberal voters who drifted to Teal candidates last year.
The issue is not so much whether there should be a cut back in super tax benefits for the rich but one of trust and Labor’s approach to more measures cloaked in “soak the rich” garb.
The shadow Treasurer, Angus Taylor, made it clear in his comments after the announcement that he intended to push the message of Labor being a party of broken election promises and higher taxes.
Fund manager Geoff Wilson led a masterful campaign in the 2019 election against Labor’s proposals and has continued to express concern over Labor’s more modest proposed changes to franking credits since the election.
Superannuation is a slow burn issue with the electorate which has the potential to become more important if retirees and small businesses and others who may have structured their affairs around the current super system become concerned about what else could be ahead.
The super tax issue has taken the Voice off the front page and replaced it with a battleground which the Liberals are more comfortable with.
It will take time for the electorate, which has been sold on the idea that superannuation is a tax break which unfairly benefits the wealthy — with tables showing one person or fund apparently has more than $500m in super — begins to wonder whether such an approach might have broader consequences.
Unlike the imposition of a mining tax, imposing new taxes on the $3.4 trillion superannuation system is not going to be met with public criticism from the superannuation industry.
The biggest players in the sector these days are the industry super funds which now control some $1 trillion in super assets.
With its strong links to the Labor Party, the sector is not one which is going to challenge Albanese and Chalmers.
The sector will insist on some benefits in the May budget – including the potential payment of superannuation on the federal government’s paid parental leave scheme.
The super lobby itself paved the way for the imposition of caps, advocating caps of $5m on super in a range of pre-budget submissions – a figure it estimates was justifiable on the grounds of fairness and equity.
Significantly, Albanese and Chalmers have moved quickly to push ahead even further to set a cap of $3m for the most generous tax concessions.
One could argue that it is clever politics – in for a penny, in for a pound – if you are going to set new caps on super benefits start out aggressively.
The speed at which Labor has moved on the issue is significant, and indicative of the very different style of the Albanese government.
The announcement will lead to many questions about who is affected and how.
What will it mean to people on defined benefit pensions? How will it affect the very generous superannuation payouts which long serving politicians like Albanese can expect?
And exactly what does it mean for those Australians who are already in pension mode who may have more than $3m in super?
Apparently more detailed fact sheets are being prepared on how the system will work.
The swiftness from talk over the “purpose of super” to the specifics of a 30 per cent tax on earnings of super balances over $3m, shows how fast Labor can and will act when it wants to raise more money.
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