Super rich pickings an illusion

The federal government has been quick to quarantine arguments over its planned reforms of superannuation to soaking the rich who can probably afford it. But taxpayers must keep an eye out for a hidden agenda that will spread the pain to everyone.

In any case, government claims that a clampdown on the tax treatment of big-balance superannuation accounts does not stand up to scrutiny. First of all, the language used by Jim Chalmers, that taxpayers are missing out on tax that would otherwise be paid, fails to take account of the fact that investment decisions are based on obeying the rules of the road as they stand. If the rules are changed for superannuation, it is reasonable to expect that beneficiaries will change their behaviour and seek alternative ways to legally minimise their taxation liability. As a result, the additional take for government may be less than anticipated.

The same is true for proposed changes to the payment of franking credits by companies, which allow shareholders to benefit from tax already paid on their behalf as owners of the company. If the rules on franking credits are changed, rather than pay tax in Australia, companies may instead decide to alter the way they raise and structure their capital and invest offshore. Both in the areas of superannuation and franking credits, the government must be mindful of the unintended consequences of any changes it makes. This includes the pressure it will put on the overly generous preserved benefits superannuation payments being made to former politicians and public servants, and those who started work before the rules were changed for public servants in 1990 and federal parliamentarians in 2005.

As we have reported, both Anthony Albanese and Wayne Swan are entitled to preserved benefits pensions for life. Neither will say how much they are entitled to receive. The cost of commonwealth defined benefit schemes for public servants will peak at $182.9bn in 2033-34. The combined cost of the parliamentary and public service defined benefits schemes will peak at $12.7bn a year between 2044 and 2048. These are rich pickings.

Rather than worry about super-sized accounts of rich individuals, superannuation account holders should be on the lookout for changes that will impact everyone. This includes measures that would stop early claims from super in special cases.

Tougher rules on withdrawals would suit the union-backed funds but it is something voters are entitled to decide whether they agree with or not.