Retirees would have to pay 15% on super income over $75,000 and workers earning more than $250,000 face paying more tax on contributions
Labor plans to wind back generous superannuation concessions for Australia’s high income earners, unveiling two new measures raising revenue worth $14bn over ten years.
The Labor leader, Bill Shorten, and the shadow treasurer, Chris Bowen, will on Wednesday announce plans to reduce the tax-free concession currently available to people with annual superannuation income from earnings of more than $75,000.
Earnings over the new threshold would be taxed at 15% in the retirement phase. The proposal would take effect in July 2017, and affect superannuation account holders with balances in excess of $1.5m.
The second measure will involve lowering the current high income superannuation contribution threshold from $300,000, to $250,000.
Currently people earning over $300,000 pay a 30% tax on their super contributions. The higher tax will now apply when earnings exceed $250,000.
The announcement will come ahead of a speech on fiscal policy that Bowen intends to deliver at the National Press Club on Wednesday.
In a statement, Shorten said the opposition believed winding back super concessions for the wealthy was necessary to ensure sustainability at the very top end of the system.
But he signalled the two proposed revenue measures were as far as the ALP would go. “If we are elected these are the final and only changes we will make to the tax treatment of superannuation,” the Labor leader said.
Bowen said the tax-free status of all superannuation earnings for high-income earners benefited wealthy Australians at the expense of low- and middle-income earners, and created “an unsustainable cost to the retirement income system.”
Labor sent a clear signal at the time the Abbott government released the tax review that it was interested in winding back generous super concessions.
The government’s tax review advocated an overhaul of super tax breaks on the basis of equity and sustainability.
“The flat rate of tax on superannuation contributions means that most high income people receive a larger tax concession, relative to their marginal tax rate, than low income people. The same is true during the accumulation phase and even more so during the retirement phase when there is no tax on earnings,” the review said.
A recent report by the Association of Superannuation Funds of Australia also found that thousands of retirees with more than $2m in their superannuation accounts received more than $5.2bn collectively in tax-free income-stream payments in a single year.
But despite the calls for reform, the prime minister Tony Abbott quickly played down the prospect of any imminent changes to the super system.
“Unlike Labor, we have no plans to increase taxes on superannuation and we’ll honour our commitment not to make any adverse or unexpected changes to superannuation during this term,” the prime minister said last week.
The government and Labor also continued to trade blows on Tuesday about a package of anti-avoidance tax proposals floated in March by Shorten and Bowen.
The treasurer Joe Hockey wrote to Bowen on Tuesday taking issue with elements of the Labor package, and asking that the opposition release all information relating to its multinationals tax package, including the parliamentary budget office costing, to allow an “informed public debate about multinational tax avoidance.”
Hockey said Labor had refused to release all the underlying assumptions behind the $7.2bn initiative, and he said cracking down on tax avoidance by multinational companies was a “bipartisan objective.”
Bowen said if Hockey needed additional information about the opposition’s policy then he should “take up Labor’s long-standing offer for a detailed briefing.” The shadow treasurer contended that Hockey was grandstanding on the issue.
“We have approached this policy in a spirit of bipartisanship because we know it is in Australia’s national interest to ensure big companies pay their fair share,” Bowen said on Tuesday evening. “Sadly, we have seen nothing but public grandstanding from Mr Hockey in return.”