Peter Costello moved quickly last week to poor cold water on Nick Minchin’s call
for the abolition of the 15% superannuation contributions tax in this
year’s budget by claiming super already received special treatment.
“Superannuation is concessionally taxed,” Cossie declared. “That is, if you put money
into superannuation, the taxes you pay are substantially less than if you take
it as income.”
Yes, with Australia’s punitive personal income tax rates at the top
end, superannuation is taxed at a slightly concessional rate, but our
taxes still remain close to the highest in the world and our savings
rate is also poor because of the debt-funded consumption binge of
Of course, if Cossie was able to contemplate comprehensive tax
reform and reduce the two top income tax rates in the forthcoming
budget, this would reduce the scale of the concession
offered to super funds. Minchin was absolutely right to argue that
abolishing the contributions tax would not overly stimulate the economy
and risk an increase in interest rates, although it would add to the
“weight of capital” deluging equity markets as Australia’s
superannuation pool races towards $1 trillion.
Cossie’s blanket statement was also a little misleading because super
is not concessionally taxed for low income earners. For instance, what
about a local government councillor in Victoria who pockets $18,000 a
year. They would be better off to take it as income.
Bizarrely, Victorian councillors and mayors are one of the few groups
in the community who don’t receive any superannuation, because the
Bracks Government’s legislation is silent on the matter. How odd that
non-executive directors of listed companies must receive the 9%
superannuation contribution by law, but those running Victoria’s 79
councils don’t get a cracker.
Bill Kelty’s insistence in the late 1980s that superannuation payments
include everything has led to millions of accounts being unnecessarily
opened and subsequently lost. For instance, if I give a lecture at some
university we often have this stupid super requirement come up.
Now that the government has got its super-choice legislation through
but seemingly failed in its goal to undermine the union-associated
industry funds, maybe it’s time for some more meaningful super reform.
Abolishing the contributions tax and a sensible winding back of the scope of
what sort of payments demand super contributions would be a good start.