The federal government will move quickly to lock in laws defining a purpose for superannuation before making any changes to retirement nest eggs as new figures show two-thirds of working Australians have less than $100,000 in their superannuation accounts.
and can reveal the government hopes to get through parliament before the end of this financial year a formal objective of super, before pushing ahead with any other reforms.
The government has come under fire this week from the opposition and elements of the super sector after Treasurer Jim Chalmers on Monday signalled plans to target the growing cost of superannuation income tax concessions.
The concessions, worth about $50 billion a year, are expected to be larger than the cost of the age pension within 20 years.
Chalmers revealed Labor’s plans to legislate superannuation’s objective as to “preserve savings and deliver income for a dignified retirement, alongside government support, in an equitable and sustainable way”.
Then-treasurer Scott Morrison introduced laws in 2016 to set an objective for superannuation, but they were abandoned as the Coalition announced policies that enabled first home buyers to access their super to get into the property market.
On Friday, Prime Minister Anthony Albanese said the government was focused on setting in law the objective for superannuation.
“We want to see the objectives of superannuation enshrined, and the objectives are about people’s retirement incomes. That is the purpose of superannuation,” he said.
“There are exceptions in which people have been able to use their superannuation, but that’s the objective. That is what we have said, that is what we are doing.”
Opposition Leader Peter Dutton said anyone with superannuation should be worried by Labor, noting a person who had enjoyed a windfall or strong investment returns would be punished under any changes.
“Maybe they put money into crypto or into some sort of shares that have gone through the roof and their balance has gone up dramatically. Now they’re the people that Labor is talking about taxing and taxing a lot,” he said.
But 2019-2020 financial year figures from the Australian Tax Office show few have enjoyed such substantial windfalls, with about two-thirds of Australians or 11.3 million people holding less than $100,000 in superannuation. Their balances are worth a combined $321 billion. This cohort is dominated by young people, women and part-time workers.
At the other end of the scale, just under 80,000 Australians – or 0.5 per cent of the population – have super balances worth $2 million or more. Their accounts total $302 billion.
The figures, provided by the ATO to the Grattan Institute, show the bulk of the country’s $3.3 trillion in superannuation are held in accounts worth between $200,000 and $1 million.
Grattan Institute’s economic policy program director Brendan Coates said the easiest change to superannuation tax concessions would be adding a higher super surcharge to balances of more than $2 million.
“The big problem here is that we’re giving concessions for people with very large balances that never spend them in retirement,” he said. “Therefore the concessions are basically subsidising inheritances.”
Estimates for what people need in their super balances to live a good retirement vary. The superannuation peak body ASFA says that for a comfortable lifestyle, couples need about $68,000 a year and singles require about $48,000.
Super Consumers Australia suggests singles who own their own home outright and plan to spend about $44,000 a year will need $301,000 by the time they retire, and for couples who plan to spend $64,000 they suggest $402,000.
Coates said the government should not introduce a cap – or a hard limit – on the amount people can have in their super.
“People are welcome to have $2, $3, $4, or $5 million in super, they just shouldn’t be getting concessions that come at the cost of other taxpayers,” he said.
“The idea of a higher tax rate is to say well done, you’ve saved that amount, but that you shouldn’t be earning tax concessions on that balance that are more generous than what you’d be paying in the personal income tax system if that money was saved there.”
Independent MP Allegra Spender, who represents the eastern Sydney seat of Wentworth, said she was concerned about the “class-focused” comments of the government.
She said her electorate, the wealthiest in the country, was home to people who paid a large amount tax.
They would be open to changes in superannuation, she said, but the government had to explain their proposals rather than just engaging in rhetoric.
“The people in this seat do pay a lot of tax. If they want to increase taxes on super, they will want to see that it is spent on services efficiently and with good value for money,” she said.
Teal independent MPs representing wealthy electorates in Melbourne also reacted negatively to the government’s mooted reforms.
Kooyong MP Monique Ryan said she did not have an in-principle position on whether the retirement income framework required refinements.
But she said Labor’s floating of legislative change this week was “unhelpful because it creates a degree of uncertainty”.
Goldstein MP Zoe Daniel, who acknowledged the high cost of superannuation tax concessions, said the government was pursuing a “class war tactic”, adding she was “not overly keen on political parties of either persuasion fiddling around with super when people have invested in their super in good faith”.
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