The Coalition doesn’t really believe in a compulsory super system
Universal superannuation is one of Labor’s proudest achievements. We’ll always defend and protect it. But we will also lead the debate on ways to make it fairer and more sustainable.
Tax concessions are an important part of any super system, as they encourage people to put extra money into their funds.
But, instead of the present system targeting those who are at risk of drawing a government pension in retirement, existing concessions flow largely to high-income earners.
These facts were laid bare again last week in a report published by the Association of Superannuation Funds Australia. The report highlighted that there are 475 people with super balances in excess of $10 million who are earning tax-free income streams of about $1.5m each year or more than 24,000 self-managed super funds with account balances of more than $2m that have annual tax-free earnings in the hundreds of thousands.
As ASFA states: “Income streams approaching or in excess of $1m a year appear to be more related to tax planning and estate planning than for reasonable retirement expenditure needs.”
We all know Joe Hockey likes to talk about the end of the age of entitlement. Well, the Treasurer should also have a look at recent research by the Australian Institute of Superannuation Trustees and Mercer, which shows there are more financial benefits accruing to high-income earners than low-income earners who rely on government payments.
The research found that the top 10 per cent of wage earners received almost $500,000 in government support through super tax concessions across a lifetime. Compare this with the $400,000 received by the bottom 10 per cent decile, largely through the age pension.
Of course, these issues have been known for some time. Treasury analysis commissioned by Bill Shorten, as superannuation minister, back in 2012 showed more than a quarter of all super concessions accrued to the top 5 per cent of income earners.
The same analysis highlighted the inequitable arrangements around super contributions where a worker earning more than $180,000 a year received a 30 percentage point concession while a worker on an average wage received a 17.5 percentage point concession, barely half that of a high-income earner.
What have we had so far from the Coalition on this important policy issue? Obfuscation at best and, at worst, complete denial about these problems. This is a government that would rather focus its attention on cutting government payments for Australia’s most vulnerable than have a conversation about policies that benefit the well-off.
The Liberals can’t even seem to come to a consistent view on this issue. A day after Hockey declared he wanted a “national conversation” on tax, Tony Abbott and senior Liberals attempted to shut down the debate on the sustainability of super tax concessions for wealthy Australians.
Some even went as far as to declare any potential bipartisan approach on this issue “was complete rubbish”.
With the Coalition all at sea, Labor has been talking about this problem for months. I hosted a stakeholder round table on this exact issue just last week. Embarrassingly for the Coalition, it is now even out of synch with its own reports.
The government’s own Financial System Inquiry pointed out that 35 per cent to 40 per cent of all super concessions accrued to the top 10 per cent of income earners in Australia, concessions the inquiry states “are unlikely to reduce future age pension expenditure significantly”.
In stark contrast to the Coalition, Labor has a proud record when it comes to superannuation. In our last period in government, we introduced a low-income superannuation concession and a highincome superannuation charge to make superannuation contributions concessions fairer.
The former gave 3.6 million low-income workers earning $37,000 or less, including 2.1 million women, an incentive to contribute to their superannuation funds. The high-income superannuation charge now means that the top 1 per cent of income earners earning above $300,000 get a reduced concession, mirroring the concession received by people earning average incomes.
The Coalition simply doesn’t believe in a compulsory super system. Its record since coming to office is nothing less than appalling. It froze the super guarantee, which will rob current workers of an extra $40 billion in their super accounts by 2023. And, in the most disturbing reflection of Coalition values, it reversed Labor’s modest policy changes reining in concessions for people with $2m superannuation balances while abolishing the low-income superannuation concession. Talk about twisted priorities.
The government is continuing to build on its trifecta of deficits: a trust deficit, a chronic fairness deficit and a now-widening budget deficit. One would think that in this environment the Coalition might be a bit more united on an issue that, if fixed, would make the superannuation system stronger and fairer, but would also help with its budget woes. The fact is, since its first damaging budget, the Abbott government simply isn’t trusted by Australians to deliver fair economic reform.
Labor will lead this debate and pursue reform that is in the national interest and, most important, improves the fairness and sustainability of the retirement income system.
This opinion piece was published by The Weekend Australian on Saturday, 11 April 2015