Former Attorney-General Philip Ruddock backs Paul Keating on Labor’s ‘troubling’ super tax

Labor’s “troubling” tax on unrealised gains and wealthy super balances has united political elders from both sides with Philip Ruddock backing Paul Keating on the issue.

EXCLUSIVE

One of Australia’s longest-serving politicians and former Attorney-General has condemned Labor’s plan to tax unrealised gains on wealthy super balances as “troubling” — adding to a chorus of political luminaries opposing the controversial scheme.

Liberal elder Philip Ruddock, who served in parliament for nearly 43 years, joined a chorus of critics speaking out over Labor’s new 15 per cent tax on superannuation balances of more than $3m when it returns to parliament at the end of this month.

Mr Ruddock has lambasted the Albanese Government for dashing the hopes of retirees who have been contributing to super for their whole lives.

Economists and Labor elders, including superannuation architect Paul Keating, have opposed the plan because it is not indexed and would capture unrealised gains on any assets held in self-managed super funds including homes and family farms.

”It’s a contributory scheme and people are required to pay a substantial part of their earnings,” Mr Ruddock told the Saturday Telegraph.

Philip Ruddock backed Paul Keating’s opposition of Labor’s super tax. Picture: Jason Edwards

“The idea when people have been making those contributions over such a long period of time that you’d suddenly be stripped of those benefits is troubling.

”If you’re then looking at trying to tax gains in value in assets that the fund might hold … the principle in my view is what’s flawed.”

The proposal has united political elders from both sides with Mr Ruddock backing Mr Keating’s comments that “every young person joining the workforce this year” will have accumulated “in excess of $3 million at retirement”.

Mr Ruddock said Labor’s excuse that only a small number of people would be captured by the tax currently was “an excuse”.

The policy is not indexed and would capture 500,000 Australians currently in the workforce by the time they retire, according to modelling from the Financial Services Council.

Mr Ruddock is on the old Commonwealth parliamentary scheme that provided politicians who serve a lengthy stint a generous pension.

Former Prime Minister of Australia Paul Keating addresses the National Press Club from Sydney in Canberra. Picture: NCA NewsWire / Martin Ollman

But the Howard-Government Minister said he has independently contributed 12 per cent of his parliamentary salary over 43 years — which would surpass the benefits he receives.

Although the Labor government has carved out an exemption for state politicians and premiers on the old super scheme, the exemption will not apply to federal politicians like Mr Ruddock.

The contributions have now risen to 12 per cent for all Australians — a milestone of the super scheme that economists like Sydney University’s Dr Luke Hartigan say will mean even more Australians are captured by the tax.

“At 12 per cent, more money is flowing in, so the rate of growth is going to increase. It’s nice to pick on those few at the top end … but there’s others who have assets which are not generating an income, so it’s hard to cover the tax liability by not selling that asset,” he said.

“Everyone needs to pay their fair share and we don’t want people to use their super fund as a tax offset, but we want to make sure everyone is treated well – we shouldn’t hurt people who want to be aspirational and try to be off the pension.”

Federal Treasurer Jim Chalmers. Picture: David Clark/ NewsWire

“We want people to put money into super and keep it there, and if they’re forced to liquidate (assets), it defeats the whole purpose of (super).”

He added the move remained fundamentally flawed with the taxing of unrealised gains, which he said could force some to sell off assets held in their super accounts.

Pressure is mounting on Labor and Treasurer Jim Chalmers to consider alternative tax reforms with Chalmers’ upcoming economic reform roundtable to be dominated by discussion of the super plans.

The Financial Services Council, one of several groups preparing submissions to the summit, called Chalmers’ plan “poorly designed”.

The group will use their submission to advocate for broader tax reform including lobbying for lower company tax.

”Tax reform should put a stop to the ongoing, piecemeal changes to superannuation taxes such as the poorly designed $3 million tax that erodes public trust in our retirement system,” Executive Director of Policy Chaneg Torres said.

”We recognise that any comprehensive tax review will need to consider superannuation tax settings and improving equity in the system.

”Reforming superannuation tax settings in a strategic way will minimise the need for additional changes in the future, providing Australians with greater certainty on their expectations for retirement.”

Property Council of Australia chief executive Mike Zorbas told The Telegraph he worried of what the impact would be on property and housing.

“Should we have a progressive tax system? Yes. Is there anyone currently in favour of taxing unrealised ‘paper’ gains outside the federal government? No,” he said.

“Taxing what may not exist is an unwelcome distortion to introduce in an age of abundance-oriented reform. It will disrupt certain property investment decisions and will have impacts on the property and housing market.

“This is a concept that should be permanently removed from current and future parliamentary tax design.”

The two peak bodies join the Australian Council of Trade Unions — a key Labor ally — in blasting the proposal with ACTU secretary Sally McManus calling for the scheme to be indexed.

Amid growing criticism of the policy after Labor’s 94-seat win at the federal election in May, Chalmers told Sky News the policy was a “very modest change”.

“We’ve made it clear that it’s a very modest change, it only affects half a per cent of people with balances over $3 million,” he said.

“It’s still concessional tax treatment, just a little bit less concessional, and it’s an important way that we fund some of our other priorities, including strengthening Medicare or providing income tax cuts, helping with the cost of living and building more homes.”