Roundtable revolt on Labor super tax hikes

Labor is bracing for its controversial super tax to be a sticking point at its landmark economic reform roundtable, as unions join business in warning Jim Chalmers and Anthony Albanese that their revenue grab needs overhauling.

ACTU boss Sally McManus says Labor should index the threshold for its proposed tax hike on super accounts worth more than $3m. Picture: NewsWire

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Labor is bracing for its controversial super tax to be a sticking point at its landmark economic reform roundtable, as unions join business in warning Jim Chalmers and Anthony Albanese that their revenue grab needs overhauling.

Business leaders and special interest groups are preparing to make a flurry of submissions to the roundtable that will include alternative super tax proposals to a plan they say could hurt productivity and investment.

Following Paul Keating warning that Labor’s super tax plan would capture thousands more Australians than first expected, Australian Council of Trade ­Unions secretary Sally McManus called for changes, saying it should be indexed to reduce the number of people caught in the net over their working life.

Labor is proposing an unrealised capital gains tax on superannuation balances over $3m, without indexation – which conservative modelling suggests could affect at least 500,000 people by the time they retire.

“I do think it’s got to be indexed, because you’ve got to make sure eventually people don’t end up there,” Ms McManus said on Tuesday. “But that’s a very long time in the future. I think that it does need to be indexed though, so I do support what they’re saying about that.”

Ms McManus’s view comes after former ACTU secretary Bill Kelty last month condemned Labor’s unrealised gains tax, and said there should be indexation.

The Financial Services Council said on Tuesday it would make submissions to the roundtable specifically on Labor’s tax policy which it describe as “ill conceived”.

“The FSC would like to see a broad-ranging and evidence-based tax review, to identify ­opportunities to generate economic growth in Australia,” said the council’s executive director ­Chaneg Torres. “This will bring an end to the constant tinkering with superannuation taxes that undermines confidence in our retirement system, such as the government’s ill-conceived $3m tax. Tax reform offers the most significant opportunity to generate a step change in Australia’s rate of productivity growth.”

Business leaders such as Geoff Wilson, who campaigned against Labor’s policy on franking credits in 2019, said he would make a ­submission to the roundtable ­before it was convened in August.

“We are in the process of making a submission to the roundtable,” Mr Wilson said. “We have already highlighted in our two ­recent research papers how the proposed taxing of unrealised gains will have a negative impact on Australia’s productivity to the tune of -$94.5bn and will negatively impact innovation and aspiration while over 600,000 Australian companies lose a critical source of funding.”

On Tuesday, Employment and Workplace Relations Minister Amanda Rishworth said Labor was listening to Mr Keating’s views on the super tax. “In terms of the superannuation proposals that we have put forward around people with very, very large balances of $3m, of course we listen to different views, and we listen to Paul Keating respectfully, as we do others,” Ms Rishworth said.

Opposition Treasury spokesman Ted O’Brien said he couldn’t believe that he was on national television defending Paul Keating against the Labor Party.

“Paul Keating is dead right,” Mr O’Brien said. “Labor’s new superannuation tax is super big, it’s super bad, and over time, millions of Australians are going to be captured. Paul Keating has belled the cat, and I don’t blame him for being upset. This is a blatant tax grab, and the younger you are as an Australian, the higher the chances are that you are going to be stung by Labor’s new super tax.”

Jim Chalmers faces mounting pressure to reach a compromise on the proposed super tax hike. Picture: Dan Peled / NewsWire

FSC modelling has shown that under four different scenarios of the unrealised gains tax policy, anywhere between 500,000 and 1.8 million Australians in the workforce would be stung by the time they hit retirement.

The Greens have suggested the threshold be lowered to $2m but want the tax indexed.

Assistant Treasurer Daniel Mulino flagged on Tuesday that the thresholds would likely be changed. “I’d just say that our system is built upon thresholds that generally aren’t indexed, but that are reviewed by governments from time to time,” Dr Mulino told Sky News.

“Even where we don’t index things in the tax system, if you’re asking me will our tax system thresholds be exactly the same now in 2080 as they are today, I would say that I doubt that.”

Dr Mulino said he would ­consider an alternative super tax proposal put forward by a former Westpac official that would raise $1bn more than Labor’s policy without taxing unrealised gains. Its structure allows for indexation and simple calculations for super funds.

The alternative proposal would be a flat 20 per cent tax on all super earnings, with a 5 per cent rebate for people whose accounts are worth less than $3m. It is similar to a plan former Treasury boss Ken Henry recommended in his tax review, which was overlooked by the previous ALP government and Treasury. The alternative proposal was designed by former Westpac ­official Kerry Gore, who said he would submit his proposal to the roundtable.

Dr Chalmers last month declared he would not negotiate with the Coalition on super­annuation tax reforms, just a day after Mr Albanese left the door open to a compromise.

The Treasurer preferred to do a deal with the Greens.

Dr Chalmers lashed out at ­opponents of the proposed tax hike, accusing critics of ­pretending to dislike the model of taxing un­realised capital gains while ­opposing efforts to clamp down on tax concessions for the wealthy.

Mr Albanese on Tuesday avoided questions around the unrealised gains tax and who it would affect, saying Labor was discussing changes. “These are very modest changes that are being discussed,” the Prime Minister said. “Paul Keating’s right to support superannuation, and it’s a creation of the Hawke and Keating Labor governments … Paul Keating, of course, as treasurer, then as prime minister, championed superannuation to improve retirement incomes for Australians.”