Super tax breaks for uber-rich hurt everyday Aussies

Treasurer Jim Chalmers. Picture: NCA NewsWire / Gary Ramage

Jim Chalmers and his very good Assistant Treasurer, Stephen Jones, have fired the twin barrels of the starter’s gun on superannuation reform. It’s the conversation Australia needs to have.

Superannuation delivered by Paul Keating and Bill Kelty is a Labor policy legacy as important as Medicare or the National Disability Insurance Scheme.

Labor delivered access to retirement savings, which had been the purview only of the wealthy, to working people. It gave working people freedom and dignity to save through their lives and not simply live off the Age Pension on retirement.

The superannuation sector is the envy of the world and has built a savings pool of more than $3.3 trillion. It gives working Australians access to investment in domestic and international shares, infrastructure, office towers and shopping centres as well as being part of private equity deals in Australia and beyond.

But just as 1970s bottom-of-the-harbour tax avoidance schemes used by wealthy elites had to be stopped, so too the federal Treasurer needs to end the tax rort that super has become for the richest Australians.

One self-managed super fund has accumulated $400m in funds and pays the same tax rate as the retail worker, the cleaner or the nurse on their super savings. There are 32 funds that hold more than $100m each. These funds aren’t about a dignified independence in your retirement, they are a tax haven for those who should be paying more if those assets were taxed under capital gains or income tax arrange­ments.

The average 55-year-old man has a balance of $300,000 and woman about $200,000. General advice is that couples at retirement at 65 need a combined balance of $600,000 for a comfortable retirement. The system was designed for working people to have retirement independence, not the uber-wealthy to have a tax holiday paid for by the federal budget. Australians should not be rewarding those paying accountants and lawyers to avoid paying their fair share.

Chalmers is having the conversation and rightly has called out that super tax concessions will exceed the entire amount spent on the Age Pension by about 2050 – it’s not sustainable and it’s certainly not fair. While the Coalition inevitably has come out saying this is a new tax when Australians can least afford it, the changes proposed by Chalmers and Industry Super Australia are simply to rein in rorts and make superannuation sustainable.

Wealthy super holders already pay higher taxes on contributions under tax measures endorsed and used by the Morrison government. High-income earners pay 30 per cent, not the concessional 15 per cent, if they earn more than $250,000 a year. This was Coalition tax policy, so it’s a bit rich arguing against Chalmers’ modest calls for further reform to ensure super remains sustainable.

So, what does sensible reform look like? Industry Super has made a good case through chief executive Bernie Dean that super tax concessions should be capped at those holding less than $5m in super. Of the 23.2 million superannuation accounts in Australia, just 11,000 exceed the $5m threshold, yet hardworking Australians are paying more than $200m annually to top up these funds even further with tax concessions.

While the great Kerry Packer once suggested you were a fool to pay one extra cent in tax and Deng Xiaoping said “to get rich is glorious”, Deng should’ve added: “When using public money to do it then some might think it’s more like theft than free enterprise.”

As Chalmers works to deliver his new Labor thinking of values-based capitalism, he is right to call out tax rorts and unsustainable taxpayer largesse to those most able to afford to contribute more.

After all, the federal budget should be all about our common wealth and prosperity as a nation. Superannuation is too important to too many to allow the few to rort a benefit that would undermine the whole system.

Labor is showing the courage needed to have the conversation about the purpose of superannuation while staring down the inevitable Liberal scare campaign that will run in the lead-up to the April Fool’s Day by-election in the seat of Aston.

Labor may have needed to be small target and Morrison-lite to win government last year, but I know the Treasurer will be looking at Chris Bowen’s other ideas for tax reform as he seeks to build the revenue side with cuts to unaffordable tax concessions.

Labor has great reform proposals on negative gearing, capital gains tax and franking credits reforms that would all build a more sustainable federal budget.

While Labor backed down last October on tackling the stage three tax cuts, it has promised to review their sustainability in future budgets. It’s encouraging that Labor from the Treasury benches has the courage to have the adult conversation about tax reform and a sustainable budget.

Chalmers may have been ridiculed by Josh Frydenberg as Lord Farquaad before the federal election last year, but this latter-day Clark Kent will show just how careful he can be around this super policy kryptonite.

All governments use their first full-year budget to enact the greatest budget changes, then rely on the next two to patch up any electoral wounds before the next general election – who can forget Joe Hockey’s first time?

Australians are suffering under huge cost-of-living pressures while rightly demanding world’s best healthcare, childcare, aged care and, a global first, NDIS.

Taxpayer money flowing to those with already bloated super accounts is simply freeloading bounty that can’t continue. The Treasurer should be congratulated for grasping the nettle of tax reform and having the conversation about making superannuation sustainable for working people and for the taxpayers of Australia.