Chalmers ‘confused’ about veteran MPs’ super tax escape clause: Bragg

Liberal senator Andrew Bragg has accused Treasurer Jim Chalmers of not knowing how the government’s new super tax will work after a senior Labor minister refused to say whether it was fair that some public officials would be able to delay paying their resultant tax bill.

In a statement on Tuesday, Bragg said Chalmers had been unclear and confused about how the tax on super balances of more than $3 million would apply to the prime minister.

Minister for Employment and Workplace Relations Amanda Rishworth said the new super tax was reasonable.Credit: The Sydney Morning Herald

“Chalmers clearly hasn’t read his unrealised gains tax bill and draft regulations,” he said. “He doesn’t know how it works for the prime minister and retired politicians.”

A spokesperson for the treasurer pushed back against Bragg’s claims, saying the senator’s contributions to the debate had become “desperate” and “dangerous”.

“Andrew Bragg is lying and misleading again in his desperation to get selected for the Liberal shadow frontbench,” they said.

Pressure on the government’s new tax on superannuation earnings has come from tax experts and investors who say the threshold should be indexed and the capturing of unrealised capital gains trashed. Chalmers himself has dismissed the calls.

The new tax, set to take effect on July 1, will double the tax rate for superannuation earnings from 15 per cent to 30 per cent for the portion above $3 million in a super balance. The tax rate will also apply to unrealised capital gains on amounts above this threshold.

Chalmers, at a press conference this month, said he was unable to put an exact number on the amount of tax the prime minister would pay in the first year of his pension, but said there were provisions in the draft regulations for defined benefit schemes that would ensure the taxes were fair.

Bragg took aim at the comments, saying it showed Chalmers was unsure about how his policy affected defined benefits.

However, Chalmers’s spokesperson said it was clear the changes to the super tax would apply to defined benefit interests.

“Defined benefit interests, including those of federal parliamentarians, are covered by our changes,” they said.

Earlier, Employment and Workplace Relations Minister Amanda Rishworth deflected a question on Nine’s Today Show on Tuesday morning about whether it was fair that some politicians elected before John Howard scrapped the scheme in 2004 could wait until retirement to pay the tax bill on their savings, while others caught by the tax – estimated to be one in 200 people – would have to find the cash to pay immediately.

Rishworth, elected in 2007, will not get an annual salary when she leaves parliament, but argued that all politicians would still have to pay the higher tax rate on earnings if their super balances exceeded the new threshold.

“I get super as a federal politician just like other Commonwealth public servants, and I’ll be subject to the same tax if my balance ever reaches over $3 million,” she said.

As reported by the Financial Review, politicians who began their careers before 2004 are covered by a “defined benefit scheme”, which would pay out a sum each year upon retirement and allow them to push back tax payments on those benefits until then.

Both defined benefits and ordinary superannuation are generally inaccessible until retirement, but the tax bill on super can be paid by drawing down on the existing balance, while defined benefit scheme pensions cannot be touched until they are paid out in retirement.

Bragg said it was wrong to assume these politicians and public servants, many of whom also have standard superannuation accounts, would not be able to pay the tax on their retirement savings as a result of this distinction.

“They can still pay the tax out of funds in their superannuation account,” he said. “We don’t agree with the new tax, but if it’s going to happen, [Labor] shouldn’t make special deals for politicians.”

Beneficiaries of the defined benefits schemes in the current parliament include Opposition Leader Sussan Ley, Prime Minister Anthony Albanese and cabinet ministers Tanya Plibersek and Penny Wong.

While politicians accruing retirement benefits under the schemes will not have to pay up immediately, they can choose to do so. Any outstanding tax bill they had would be charged with interest at the long-term government bond rate, which is about 4.5 per cent.

Andrew Boal, the Actuaries Institute’s retirement strategy group chairman, said there were several ways the tax on defined benefits could be calculated.

Depending on the prime minister’s exact personal circumstances, the amount of tax paid on his defined benefits could vary, Boal said, noting the default is to apply the formula already in place to calculate a family law split.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.