Labor’s super-duper fibs on super tax revealed
If Labor lied about what it was saying publicly about new taxes in 2022, what is it planning behind closed doors in 2025 that it won’t tell us about?
Before the May 2022 federal election, Anthony Albanese said: “We have no intention of making any super changes.” After the election, on August 22, 2022, Jim Chalmers told a superannuation roundtable discussion that Labor was not interested in engaging in “unnecessary or ideological fights” about super.
That was the story for public consumption. There was another story unfolding in private.
Behind closed doors, Labor had been planning the controversial new super tax at the same time Albanese and Chalmers were telling voters they had no plans.
We know this now only because lawyer Bruce Watson received a final response from Treasury to a Freedom of Information request last week that he lodged in April. Watson asked Treasury to provide any documents, prepared by or held by Treasury, created in preparation of the Treasury’s fact sheet dated February 23, 2023, about the new superannuation tax changes.
I am paraphrasing Watson’s request because the lawyer chose his words carefully to catch any documents that showed Treasury and/or Chalmers or other ministers had been working on Chalmers’s controversial super tax changes when the man who wanted to be Treasurer and the man who wanted to be Prime Minister said they had no plans to change superannuation.
Armed with Treasury’s fact sheet, on February 28, 2023, Labor announced its controversial plans to tax super balances above $3m at a higher rate, including, for the first time, taxing unrealised capital gains.
Treasury’s responses to Watson’s FOI request blow the whistle on Labor’s duplicity before the 2022 election.
At first, Treasury rejected Watson’s request for documents because it would require too much work. There were, the Treasury official said, “more than a thousand documents related to the development of” Labor’s new super tax regime.
It would take more than 80 hours of work, the official said, and this would “place a significant burden on the limited number of Treasury staff and would substantially and unreasonably divert the resources away from Treasury from its other operations”.
This rejection was interesting. Watson had uncovered that there were more than 1000 documents created before the February 23 fact sheet that set out Labor’s radical changes to super. In other words, Labor’s super tax changes weren’t whipped up one lazy afternoon after the 2022 election.
Knowing that much, the unperturbed Watson wrote back and said: if providing 1000 documents is too hard, just give me the first 10 documents, by date, prepared for or received by Treasury before its February 23, 2023, fact sheet for Labor.
Treasury’s next response was a beauty. It provided a table of 10 unidentified emails and attachments. It said it had exempted the entire contents of the 10 documents pursuant to section 47C of the FOI Act because, in words reminiscent of the TV sitcom Yes Minister, they “comprise policy advice, analysis, costings and modelling prepared as part of deliberative processes to advise ministers on changes to superannuation policy settings for large superannuation balances”.
Let’s translate that fully into Yes Minister speak. Picture the final scene.
Sir Humphrey is gloating in his private club over a whisky with a fellow secretary of a department after a hard day dealing with a pesky, impertinent FOI request. “Old boy, he who would keep a secret must keep it a secret that he hath a secret to keep. So I told the persistent codger to bugger off. The information was far too important for public eyes,” Sir Humphrey says, laughing. “Good God, it would have suggested that Labor might have been lying prior to the last election when it said it had no plans to change super.”
Alas, Sir Humphrey didn’t write the response. Treasury had revealed to Watson enough key information to expose Labor as potentially fiddling with the truth. The first document prepared for the Treasury fact sheet is an email dated June 2, 2022. The second document is dated June 8, 2022, along with an attachment.
Labor was elected to government on May 21, 2022. So, as early as 10 days later, Treasury had prepared or received documents about Labor’s planned super changes. We are entitled to suspect that Labor must have been planning this for some time.
It is of course possible that this new superannuation tax was entirely the product of some fertile brain in Treasury who sprung it on an unsuspecting Treasurer, who then grabbed it.
But this is unlikely, given Labor’s longstanding antipathy towards self-managed superannuation funds, along with its desire to indulge the industry super funds that give it (via the unions) so much campaign money, and its longstanding hankering after new wealth taxes. If Chalmers says this was solely a post-election brainwave cooked up by Treasury, he should publish all the documents that prove it.
Watson’s FOI documents from Treasury more likely establish that Labor was telling a whopper in the lead-up to the 2022 election about having no plans to change super. And Labor continued to plan, behind closed doors, after winning government while telling the public it had no plans.
Remember Chalmers’s adamant assurances at the August 2022 superannuation conference that Labor had no plans to get into ideological fights over super. The fundamentals of superannuation would not be touched, he promised.
One of the fundamentals of good tax and superannuation policy has long been – actually, has forever been – that unrealised capital gains are not taxed. By all means, tax realised gains, even increase the rate. But adding an entirely new tax is messing with the fundamentals of superannuation.
Given that Watson’s work has revealed how early Labor was working on throwing people with SMSFs under the bus, the next question is: who was Chalmers getting advice from for these radical changes that would, for the first time, tax profits in a super fund that have not been made? A new frontier of Labor’s old-fashioned class war doesn’t happen overnight. And this one is squarely aimed at wealthy people who look after their own superannuation investments with SMSFs, rather than boosting the power of industry super funds.
Was Chalmers using the undoubted know-how and strategising firepower of the industry funds to prepare his attack on SMSFs?
Could Chalmers have been getting advice from Wayne Swan, his political mentor, the former Labor treasurer and the man who was appointed chairman of industry super fund CBUS the year before?
Swan has certainly been a big backer of Labor’s tax changes to super that will patently benefit industry super funds such as CBUS. Extra money will almost certainly flow to these funds from people closing down their self-managed super funds.
While industry funds and SMSFs hold illiquid assets, the size and diversity of industry funds mean their members can easily get liquidity to cover the new tax by selling units in the fund. The poor schmucks who put their hard-earned money into an SMSF, on the other hand, will more likely need to sell underlying assets – say a house or a farm – in the fund to get cash to pay the new tax.
Swan has been a wonderfully reliable ally to his protege Chalmers, attacking those “millionaire retirees” who, he says, use superannuation to avoid taxes.
Swan, of course, is a member of a parliamentary defined benefits pension scheme that has been estimated to give him an annual pension, indexed to inflation, of more than $300,000. Is Swan saying that superannuation of more than $3m is too much or is a tax rort? We ask this because the capital value of a pension that gives Swan a government-guaranteed (risk-free) amount of more than $300,000 a year, indexed to inflation, would be vastly more than $3m.
Labor will say that events from 2022 are of no interest now, given the May 2025 election. Surely that retrospectively cures Labor’s 2022 lie to voters.
That may be true. Even if the Liberals had been halfway competent at the last election and exposed Labor’s duplicity, it most likely would not have changed the election result. But it is the job of an alternative government to expose when the current mob is lying to voters.
It is a given that governments and those in opposition work on major changes over a period without necessarily announcing those changes. Policy changes should be done carefully. But Labor’s flagrant duplicity in 2022 raises the obvious question: if Labor lied about what it was saying publicly about new taxes in 2022, and what it was simultaneously planning in private, what then is it planning behind closed doors in 2025 that it won’t tell us about?
Leopards don’t change their spots. A party premised on a class war against the wealthy might be planning to tax the unrealised profits of your home. How much will Labor decide is too much for a home? One that’s worth five million? Ten million? Labor’s carefully planned super tax subterfuge may not be as clever as Chalmers thinks it is.
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