Budget 2016: top earners to grin and share it on tax slug

The Treasurer’s calculated gamble the rich will still find the Coalition more attractive than Labor come polling day.

Scott Morrison, left, and Malcolm Turnbull prepare to front the cameras in Canberra Picture Kym Smith

High-income earners have been slugged $6 billion in the budget — half of which will go to the less well-off as Scott Morrison plays Robin Hood with the Coalition’s key constituents.

The slugs, contained in a crackdown on high-income superannuation tax concessions, are a calculated gamble by the Treasurer that the rich will still find the Coalition more attractive than Labor come polling day. That belief is stoked by Labor policies, such as Bill Shorten’s indications Labor will keep the 2 per cent temporary deficit levy on incomes over $180,000 and his criticising the staged introduction of company tax cuts to larger firms.

Among the high-­income earner hits in the budget was the $1.6 million ceiling on the amount of money that can be transferred to retirement ­accounts. This will raise $2bn over four years. The lifetime cap limit for non-concessional contributions of $500,000 will raise $550m over the forward estimates, and reducing the concessional contribution cap to $25,000 a year and increasing the tax on contributions for people earning more than $250,000 will raise $2.45bn. These measures will cost people earning $250,000 to $300,000 an extra $3750 in tax on a contribution of $25,000.

A further $1bn will be raised from tighter treatment of death benefits and strengthened tax-­integrity measures.

The Treasurer said the changes in the concessional contribution caps would affect only 3 per cent of superannuation account holders, while the tighter transfer balance limits, lifetime concessional cap and 30 per cent super contribution tax each affect 1 per cent of holders.

Judges, retired politicians and retired public servants receiving defined benefit pensions above $100,000 would also find their earnings above this amount taxed. A secretary of a public service department or a Family Court judge would pay $8000 more tax on a $254,000 pension, while a former cabinet minister on a pension of $167,000 would pay $4000 more.

The government estimates about 150 retired politicians, 170 former federal judges and about 1000 retired public servants will be hit in the first instance. The government believes it is entitled to levy the extra tax on the pensions of retired judges despite the constitutional independence granted to the judiciary from the executive.

Workers earning more than $87,000 will get $315 a year extra from the decision to lift the 32.5c tax threshold from $80,000 to $87,000, worth just over $6 a week. While high-income earners will pay more through super, low-income earners mostly missed out, with the Treasurer arguing they received about $300 when the government kept the carbon tax compensation after the tax was abolished. That compensation will be scrapped for new welfare recipients and redirected to the NDIS.