Labor's Plan To Make Superannuation Fairer

/media/1786/parliament-web.jpg

A Shorten Labor Government will ensure superannuation tax concessions go to those who most need assistance to save for a secure retirement.

Offering incentives through the tax system is an important way to encourage Australians to save for their retirement. But our current settings are not fair, and they aren’t sustainable.

Superannuation tax concessions should be targeted to the cohort of people that need help to save more.

LABOR’S PLAN:

Labor will lower the annual non-concessional contributions cap to $75,000

Only 0.7 per cent of Australian taxpayers made $100,000 or more in non-concessional contributions in 2012-13. Over 86 per cent of taxpayers made no non-concessional contributions whatsoever in that same year.

Many Australians will make a single, large non-concessional contribution at some stage in their working life – for example with an inheritance or the sale proceeds from a property. The superannuation system allows for this by letting Australians bring forward three years’ worth of contributions into a single year.

But Treasury figures indicate the average contribution for these one-off lump sums is $135,000 – well below the $300,000 allowed under the Liberals’ plan.

By lowering the annual non-concessional contributions cap to $75,000, Labor will ensure the carry-forward allowance remains generous enough to accommodate the kind of one-off contributions middle and low income taxpayers make.

But we will also cut back opportunities for higher income earners to gain tax concessions for large annual contributions – something the Liberals have failed to do.

Labor will further lower the High Income Superannuation Contribution threshold to $200,000

The Abbott-Turnbull-Morrison Government’s superannuation changes required people earning $250,000 or more to pay 30 per cent tax on their superannuation contributions, rather than 15 per cent.

A Shorten Labor Government will lower the income threshold further to $200,000. 

Over 96 per cent of all Australian taxpayers will not be affected by this change.

Labor will reverse the introduction of catch-up concessional contributions and changes to tax deductibility for personal superannuation contributions

Each of these measures are more likely to be taken up by people on higher incomes who can afford to make additional superannuation contributions. Meanwhile, the number of middle and low income earners who have the financial capacity to take advantage of these changes is limited.

Analysis from the Parliamentary Budget Office showed that only about 2.3 per cent of taxpayers made $25,000 or more worth of concessional contributions in 2012-13, with their average income being $182,000. This is because most Australians on lower incomes simply cannot afford to make additional contributions from their take-home pay.

Industry Super Australia analysis also shows that beneficiaries of these two measures have on average an 80 per cent higher balance than the average superannuation balance.

Labor’s plan to make superannuation fairer will save around $5.4 billion over the forward estimates.